Unova Shares Slide as Firm Seeks Ways to Stem Losses

Shares of Woodland Hills-based Unova Inc. tumbled 24% on Wednesday after the manufacturer said it would consider options for boosting its stock price as it warned of a second-quarter loss of as much as 25 cents a share.

Unova, which makes everything from bar-code scanners to manufacturing gear for the automotive industry, said it hired Credit Suisse First Boston to review strategic options but declined Wednesday to state what those may be.

“At this point, the board doesn’t favor any particular alternative,” Chairman and Chief Executive Alton Brann said in a conference call with analysts Wednesday, adding that it’s possible the company would continue on its present track.

Analysts speculated, however, that Unova could consider spinning off its struggling Intermec Technologies Corp., which produces hand-held data-collection devices and bar-code scanners and printers. The division offers little synergy with the company’s Industrial Automation Systems division, which designs and installs manufacturing systems for the automotive industry and is the United States’ largest machine tools maker.

“Spinning off into two companies would probably make a great deal of sense because there’s little in common between the two operations,” said Alexander Paris Sr., an analyst at Barrington Research Associates in Chicago. “They also could more aggressively license their [data-collection] technology.”

The company has posted earnings declines in each of the last five quarters. Analysts trace much of Unova’s problems to its difficulty integrating the three companies that form its Intermec division, which has operations in Everett, Wash., beginning in 1997.

“One problem after another keeps cropping up, but I think they have good products and patents,” Paris said. “They just haven’t been able to get it all together. They feel they have a lot of value not reflected in the stock, so you have to find some ways to get some market value out of that.”

Unova stock lost $2.56 to close at $8.19 in New York Stock Exchange trading.

A sale, a merger or a spinoff are just some of the possibilities Unova might be mulling, other analysts said.

“There are a variety of alternatives, but they’re not exactly looking at this from a position of strength,” said Steven Altman, of Duff & Phelps Credit Rating Co. “Intermec sales are deteriorating, and if they’re looking to sell it, it will potentially be difficult to get a value they believe it’s worth.”

Unova blamed the expected loss in its second quarter on lower-than-expected sales in the Intermec unit, due in part to slacking demand and a reduction in its North American sales force. Last year, the company revamped its sales strategy based on accounts instead of geographic territories and eliminated 130 jobs.

Profit for the period ending June 30 will be reduced by as much as $25 million in the quarter partly because the revamped, smaller sales staff hasn’t been able to maintain the same level of productivity as before the restructuring, the company said. Sales for the unit are expected to decline 15% from $210.4 million in last year’s quarter.

The company, whose shares traded as high as $16.13 in April, said a sale of its Amtech unit, to be completed later this month, should lift earnings for the second quarter within analysts’ expectations. Amtech makes applications for radio frequency technology that can be used for everything from luggage security to package delivery.

Unova, which posted 1999 sales of $2.1 billion, was expected to earn 14 cents a share in the second quarter, versus 6 cents in the year-earlier period, according to a survey of analysts by research firm First Call/Thomson Financial.

Unova forecast weaker second-quarter earnings in 1999 related mainly to outdated automation systems at Intermec.

Then, as they installed a new computer system, additional glitches arose, extending the erosion of customers that began with disruptions from the integration, Paris said.

What’s more, order delays based on Y2K concerns hurt earnings in the fourth quarter of 1999.

Altman said the series of stumbles have called Unova’s management into question and said the magnitude of its announcement has sunk that sentiment to a new low.

“In the past, there was maybe a more exciting story that people could tout,” he said. “But it’s a little more difficult now that they haven’t had any positive surprises on the earnings front. Frankly, right now they haven’t articulated anything that would get you excited about how they’re going to fix [the Intermec woes].”

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Unova Tumbles

Woodland Hills-based manufacturer Unova, whose stock has fallen about 25% in the past year, lost another 24% Wednesday after forecasting a second-quarter loss. Monthly closes and latest on NYSE:

Wednesday:

$8.19,

down $2.56

Source: Bloomberg News