Aether lowers revenue outlook

Initial two quarters still on course, but 2nd half looks bleak

April 17, 2001|By Stacey Hirsh | Stacey Hirsh,SUN STAFF

Aether Systems Inc. said yesterday that it will meet financial forecasts for the first and second quarters but warned that revenue for the rest of the year will be lower than expected.

The company's chairman and chief executive officer, David S. Oros, said the downturn in the technology sector is making it more difficult to forecast sales. The company lowered its expectations for the second half of the year, he said, to be prudent.

"It's a smart thing to be a little more conservative, so that's what we did," Oros said.

The Owings Mills company, which makes products and services to transmit wireless information, said it now is projecting revenue of slightly more than $160 million for the year, rather than the $180 million it had previously forecast.

Aether estimated revenue for the first and second quarters at $30 million and $37 million, respectively. It is predicting a 15 percent to 20 percent sequential revenue growth for each quarter of 2001 - less than it had originally anticipated for the third and fourth quarters.

"That's in line with the numbers that I had," said George Chandler, a research analyst who covers Aether for Frost Securities in Dallas. "I did expect that the company would be seeing more difficult times than it had in the past."

But Aether is still growing, expenses are decreasing and it continues to burn through cash at a slower rate than it had expected, according to the company.

As a result, Oros said, the company expects to trim its 2001 operating loss to less than the $3.90 to $3.98 a share, excluding special items, it initially expected.

"We see it getting better," he said.

Chandler said Aether is better-positioned to weather the downturn than some of its competitors because it has so much cash - more than $800 million at the end of the year.

In terms of cash flow, Aether expects to reach the break-even point during the third quarter of 2002. That means the company won't be paying out more cash than it's taking in.

And by the third quarter of 2002, the company anticipates it will have a cushion of about $500 million.

Still, Chandler said he thinks Aether will have to restructure its business model, because the company had been ramping up its research and development in anticipation of fast growth.

"I think they're going to have to go back and strongly look at what their expenses are," Chandler said. "They've made so many acquisitions, also. They're going to have to start cutting some of that out."

Following the release of its new forecast yesterday morning, Aether's stock closed at $15.35, up 3 cents.

"It is low comparted to historic highs," Chandler said of the stock price, which reached a 52-week high of $216 in June. "Then again, we can say that for an awful lot of wireless companies."

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