Agere Suffers Hutch Hiccup
The chain reaction goes like this: Hutchison's 3G moves slowly; NEC Corp. (Nasdaq: NIPNY; Tokyo: 6701) cuts down on 3G cellphone volumes; Agere gets less money from NEC.
Revenues from NEC will drop $50 million from their December levels, to $10 million, Agere officials said. Agere shares closed down 18 cents, at $3.23, on the news.
Agere told analysts its revenues for the March quarter would be between $465 million and $475 million, with earnings between breakeven and 1 cent per share (see Agere Q2 to Fall Short). Analysts had been expecting revenues of $500.7 million and earnings of 1 cent per share, according to Multex.
Analysts don't think this spells any long-term trouble for Agere. "We believe the weakness is related [to] over-ordering at that single customer and is not a sign of weakness in the wireless infrastructure market," writes John Harmon of Needham & Co. in a report today. "We think the bigger news is that the Infrastructure segment is performing well across the board and ahead of expectations, and this segment receives much higher margins."
Indeed, along with the shortfall, Agere said it expects wireline and wireless infrastructure business to grow 10 percent, to about $131 million for the March quarter, rather than the 7 percent officials had previously predicted.
Hutchison's latest 3G setback came in January when a Hong Kong launch met with polite applause rather than a roar of approval. It's becoming something of a habit for the carrier, which had to trim down its subscribership forecasts in November (see Asia's Mixed 3G Blessings and Hutch's Subscriber U-Turn).
Agere already knew about this and warned in January that it could affect earnings. Meanwhile, 3G handset inventories at NEC -- which uses Agere baseband chips in its cell phones -- apparently built up. NEC had expected to sell 1.5 million handsets to Hutchison in the March quarter, according to analyst Jeremy Bunting of Thomas Weisel Partners.
— Craig Matsumoto, Senior Editor, Light Reading