AMP reports 35% drop in third-quarter profit Firm is trying to halt AlliedSignal takeover bid

Earnings

October 24, 1998|By BLOOMBERG NEWS

HARRISBURG, Pa. -- AMP Inc. reported yesterday that its third-quarter profit dropped 35 percent on slumping sales of its electronic connectors.

The news makes it more difficult for the company to defend against AlliedSignal Inc.'s $9.8 billion hostile-takeover offer.

AMP, the world's biggest maker of electronic connectors, said profit before charges fell to $79.3 million, or 36 cents a share, from $121.6 million, or 55 cents, in the year-ago period.

While the profit decline was less than expected, AMP will have a tough time winning the support of investors if it can't increase sales and earnings. The company's revenue fell 6.7 percent to $1.43 billion, and charges for job cuts, litigation and its anti-takeover effort resulted in a loss for the quarter. AMP shares rose 62.5 cents to close at $40.625 yesterday.

"These earnings are not terribly important," said Louis Ehrenkrantz, president of brokerage firm Ehrenkrantz King Nussbaum Inc., which owns AMP shares. "The outcome of the fight with AlliedSignal is."

AlliedSignal, a maker of aerospace and auto parts and chemicals, offered $44.50 a share in August for AMP, which makes electronic devices used in washing machines, mobile phones and cars.

AMP said its fourth-quarter earnings will meet or exceed analysts' estimates. Its cost-cutting plan is expected to save about $400 million a year, up from an earlier estimate of $200 million, the company told analysts on a conference call, said Bob Cornell, an analyst at Lehman Brothers Inc.

AMP was expected to earn 33 cents a share in the third quarter, according to the average estimate of analysts surveyed by First Call Corp. AMP also said it will earn 45 cents to 50 cents in the fourth quarter, compared with the First Call estimate of 45 cents.

"The profit-improvement plan is clearly on track and we have every confidence that the company will continue to execute successfully as we move forward," AMP Chairman and Chief Executive Robert Ripp said in a statement.

AMP said it's encouraged by last month's sales, the second-highest billing month of the year, and saw a "substantial" turnaround in Asia/Pacific region and strong sales in the U.S. automobile and appliance market, Ripp said in a statement.

"The company is gaining momentum," said Cornell, who has a "buy" rating on AMP stock. "Left to their own devices, AMP is a $100 stock in two to three years."

AMP's sales in the Americas during the third quarter, which account for about half of total sales, fell 9 percent, while revenue from Europe, the Middle East and Africa rose 1 percent. Revenue from the Asia/Pacific region, which accounts for about 19 percent of total sales, fell 11 percent.

The company said it eliminated 2,200 jobs Oct. 1, out of 4,200 planned cuts.

AMP plans to boost its earnings to $2.30 a share next year. That compares with the $1.50 a share it's expected to earn this year, the average estimate of analysts polled by First Call.

Pub Date: 10/24/98

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