"Tyco says profit will be less than forecast; shares fall
By Bloomberg News, 1/16/2002
XETER, N.H. - Tyco International Ltd. shares fell 8.3 percent after the largest maker of electronic connectors said fiscal second-quarter earnings will be less than forecasts because of falling demand from telecommunications and computer networking companies.
''During the quarter we received [electronics] orders, only to have those orders be canceled on us a week later,'' chief executive Dennis Kozlowski said on a conference call. Sales at Tyco's electronics unit will likely drop up to 25 percent in the period, after declining 19 percent in the first quarter tha t ended Dec. 31, he said.
Demand is declining even as semiconductor and computermakers begin to show sig ns of rebounding because inventories remain flush after the collapse of the telecommunications and Internet bubble. The projected earnings shortfall rattled investors already unnerved by concern that Tyco manipulates results to keep profit rising, an allegation that Kozlowski has long disputed.
''It was the electronics division that scared people,'' said Miles Berryman, who helps manage $2.5 billion for J.P. Morgan Chase & Co. in London and holds Tyco in his accounts.
Profit will be 80 cents to 82 cents a share in the second quarter. Tyco is forecast to earn 86 cents, the average estimate of analysts surveyed by Thomson Financial/First Call.
First-quarter profit more than quadrupled, mostly because of new accounting rules for acquisitions and sales and earnings from the purchase of the CIT Group finance unit in June. Sales of security and healthcare products rose.
''It was a solid quarter but the company gave the bears plenty to chew on,'' Michael Regan, an analyst at Credit Suisse First Boston Corp., wrote in a note to clients. He has a ''buy'' rating on the shares and doesn't own the stock.
Shares of Tyco, based in Bermuda and run from Exeter, N.H. fell $4.35 to $48.05 yesterday.
Tyco's shares had dropped 11 percent so far this year on speculation the company's accounting may be under scrutiny by regulators and it was interested in buying Honeywell International Inc. The company has said there isn't a Securities and Exchange Commission review and it doesn't want to acquire Honeywell.
''We remain frustrated by the negative rumors and misplaced fears,'' Kozlowski said on the call with analysts and investors. ''Our disclosure is exceptionally detailed and should quell questions about overall earnings.''
Kozlowski has made about $64 billion in acquisitions in the past eight years, making Tyco the biggest maker of connectors, valves, undersea fiber-optic cable, and security systems. In July 2000, Tyco said the SEC ended a probe of its accounting practices and recommended that no action be taken against the company after it made some changes in its bookkeeping"
