January 8, 2008

Sales Shortfall Beaches ShoreTel

ShoreTel was a washout with investors Monday.
Shares of the Internet switch maker plummeted 54.0%, or $7.06, to close at $6.02 on Monday, after it announced its fiscal second-quarter sales would be lower than expected.

The Sunnyvale, Calif.-based company reported preliminary results for the quarter ending Dec. 31. It forecasts sales between $29.7 million and $30.7 million, down from an earlier projection of $32 million to $35 million. Analysts polled by Thomson Financial expect revenue of $34 million.

John W. Combs, chief executive officer of ShoreTel, said that although the company had its second-highest revenue quarter in company history, it still “fell short of expectations.” “Our preliminary review indicates that sales to existing customers grew during the quarter, however, sales to new customers declined,” Combs said.

ShoreTel expects to announce second-quarter results after the bell on Jan. 29.

Tim Long, an analyst at Banc of America, lowered his price target on the stock to $9 from $17, but maintained his "neutral" rating.

"We are surprised by ShoreTel's December quarter shortfall considering the company's growing distribution footprint and improving brand equity post its initial public offering," Long said.

Long said a downturn in the U.S. economy may be to blame for ShoreTel’s troubles; roughly 95% of ShoreTel's sales base is domestic.

The sales weakness may continue into the third quarter, Long said. He lowered his forecasts for the quarter to a profit of 5 cents per share on sales of $31.9 million, compared with a consensus estimate of 8 cents per share profit on revenue of $36.4 million.

No comments: