Reversing a loss chalked up in its prior quarter, Symbol Technologies, Inc. today said that it earned $16.7 million in its third quarter ended September 30 on revenue up modestly to $441 million.
The revenue results, which Symbol management said "slightly" exceeded its expectation, compare with $429 million in the year ago quarter. The $16.7 million in net income for the third quarter compares to $17.8 million earned a year ago, but was far ahead of the $30.5 million loss sustained in the second quarter of this year.
For the first nine months of 2005, revenue was $1.3 billion, compared with $1.2 billion, and net income was $8.3 million, compared with $53 million in the first nine months of 2004.
Symbol's results come at a time when the maker of hand-held mobile computing devices is grappling with intellectual property legal disputes, issues arising from legal and accounting difficulties which occurred under a prior management team, a restructuring to reduce costs, and the company's search for a new chief executive officer.
The third-quarter results, however, were a hopeful sign for the company. Sal Iannuzzi, chief financial officer and interim president and CEO, said in a conference call with financial analysts that, based on booking trends, he was "cautiously optimistic" about the company's business in the months ahead.
"Symbol remains a vibrant company with tremendous opportunity," he said. "We are doing fine."
Specifically, Iannuzzi said that he was encouraged by Symbol's progress in contract wins outside of the retail market. He said that, in the third quarter, 15 new deals were signed in the travel and transportation markets, 10 of which were new customers. He also said, without providing specifics, that there had been a number of wins in manufacturing, including a deal with a "Global 100" company worth $50 million over the next two to three years. He did not identify the manufacturing company by name.
In the third quarter overall, about $15 million in revenue came from the sale of RFID-related products, compared with $9 million in the second quarter.
As a result of these developments, Symbol said its guidance for fourth-quarter 2005 revenue is $432 million. Earnings per share are forecast to be in the six to eight cents range; the third quarter came in at seven cents.
Iannuzzi said Symbol's three key initiatives for 2006 are to grow revenue and market share vertically and internationally, maintain a culture of product leadership and innovation, and deliver double-digit profit margins. He said that on the research and development front, Symbol has applied for 152 patents so far this year, compared with 148 filings in all of 2004.
In its restructuring efforts, Symbol said it has reached its previously announced $170 million operating expense target one quarter ahead of schedule and has set a new target of $160 million for the second quarter of 2006.
As has been previously reported by MA, Symbol has been engaged in a broad data collection, including RFID, patent dispute with rival Intermec Technologies Corp. The two companies recently entered into a cross-licensing agreement in an attempt to cool their disagreement, but they still have outstanding issues to resolve.
Iannuzzi said on the conference call yesterday that he sees progress in resolving the remaining disputes. "We're making significant progress in our negotiations with Intermec," he said.
Symbol is also dealing with a lawsuit charging former company officials with accounting irregularities. Symbol was forced to re-state earnings for 1998 through the first nine months of 2002. The legal expense to Symbol has been running about $7 million per quarter. A trial on the charges against the former managers is scheduled to begin November 21, it was said on the conference call.
During the question and answer session, Iannuzzi said that Symbol was still searching for a permanent replacement for former CEO William Nuti, who left during the summer to become chief executive of NCR Corp. "We've identified several candidates that are viable," he said. "But the board and I remain determined to find the best candidate. We are not in a hurry. The most important thing is to get it right."