Sitronics Hits New Low

It's been a mixed bag for the Russian vendor this week, with new deals overshadowed by Q3 losses and a lower full year outlook

December 7, 2007

3 Min Read
Sitronics Hits New Low

Russian vendor JSC Sitronics (London: SITR) has had a mixed week, beginning with contract and partnership news that gave its stock a much needed lift, followed by quarterly results and a reduced full year outlook that sent its share price to a 12-month low.

First, the positive news.

Sitronics, which specializes in OSS software, access gear, integration services, chipset development, and consumer technology products, is working with Ericsson AB (Nasdaq: ERIC) to help mobile operator Mobile TeleSystems OJSC (MTS) (NYSE: MBT) build out its 3G network in Russia. Sitronics is acting as a subcontractor in the deal, contributing integration support and participating in the development of new mobile subscriber services. (See Europe Reaches Wireless LAN Milestone.)

Sitronics then announced a trio of contracts, again with MTS, worth $39 million. This time, though, the deals were with the carrier's operations in Ukraine, with Sitronics acting as the lead contractor in a multivendor engagement. (See Sitronics Signs MTS Deals.)

The deals involve the delivery of wireless backhaul equipment from the vendor's own subsidiary Intracom Telecom , mobile cell broadcast technology from Celltick Technologies Ltd. , and revenue assurance software ECI Telecom Ltd. .

The news helped the price of Sitronics's GDRs (global depository receipts), each worth 50 ordinary shares, rise 4 percent to $5.65 on the London Stock Exchange by end of trading Wednesday. That, though, is some way off the $11.80 achieved in February, shortly after the stock's London debut. (See Sitronics Details IPO and Russian Vendor Plans $500M IPO.)

That Sitronics is winning business with MTS shouldn't come as a major surprise, however. Although the vendor is now publicly listed, it is still majority owned by Russian conglomerate Sistema JSFC (London: SSA), which also controls MTS, as well as Russian broadband operator Comstar United Telesystems JSC (London: CMST), and one of Russia's two international service providers, Multiregional TransitTelecom (MTT) . (See Rakin' In the Roubles.)

Now, the negative news.

Business with its sister firms hasn't been enough to generate profits. The vendor has been saying all year that market conditions have become tougher in its key markets of Russia, the former Soviet states, and Central and Eastern Europe, and those conditions resulted in a third quarter loss and a reduced full year outlook. (See Sitronics Reports Q3.)

The vendor generated revenues of $376.2 million and a net loss of $108 million, compared with a net profit of $21.1 million a year earlier.

The company says it expects improvements in the fourth quarter, but only enough to take its full year revenues to little more than $1.5 billion, down from the $1.6 billion to $1.7 billion range provided in September.

That warning sent the vendor's stock down more than 6 percent to $5.30 on Thursday, and the slide continued Friday, as Sitronics dipped a further $0.43, more than 8 percent, to a new low of $4.87.

Sitronics says the majority of its new business is being won by its Telecommunications Solutions division (hardware and OSS), which is currently running at a loss, and that it still expects to win a sizeable 3G project in the Middle East that has been delayed until next year.

Recent new deals include a WiMax integration deal with Zain Group in Bahrain, an optical integration deal with Greek carrier Hellas Online, a next generation billing project with Vodafone Group plc (NYSE: VOD) in the Czech Republic, and an IPTV integration deal with Jordan Telecom .

Sitronics is currently undertaking a strategic review of its entire business and is due to report the outcome in January.

— Ray Le Maistre, International News Editor, Light Reading

Read more about:

Subscribe and receive the latest news from the industry.
Join 62,000+ members. Yes it's completely free.

You May Also Like