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Harmonic shares hit sour note on sales concerns

Shares of Harmonic fall nearly 33 percent today as investors grow concerned about falling sales to AT&T.

Shares of Harmonic fell nearly 33 percent today as investors grew concerned about falling sales to AT&T.

The stock dropped $18.69 to $38.75 on a volume of 28.4 million shares, close to 13 times the stock's average daily volume of 2.2 million shares.

The sell-off was sparked by statements company executives made during a conference sponsored by CIBC World Markets. According to a report by Bloomberg, CEO Anthony Ley and chief financial officer Robin Dickson said Harmonic expects revenue from AT&T to decline.

During the first quarter of the year, the company sold $18 million in telecommunications products to the AT&T, about 28 percent of the company's total revenue, said spokesman Michael Newman. By comparison, in the third quarter of last year, the Sunnyvale, Calif.-based company generated $27 million in sales to AT&T, or 52 percent of total revenue.

The decline "was not unexpected," Newman said. "Sales to AT&T in the second half of 1999 were unusually high" because "after AT&T acquired TCI, the company moved rapidly to upgrade metropolitan cable networks and used Harmonic products."

Harmonic makes transmitters, receivers and data delivery systems for high-speed Internet access and video-on-demand services.

"The company indicated that there may be some issues in the (current) June quarter, but that they were comfortable with analysts' expectations for the year," said Lawrence Harris, an analyst at Josephthal & Co. Newman confirmed that the company is comfortable with analysts' expectations for the year.

Harris estimates that the Harmonic will earn $1.20 per share for the year. Analysts surveyed by First Call expect the company to post earnings of $1.18 a share for the quarter.

Harris said that after recent conversations with the company he believes there may be "slight reductions" in earnings for the year, even though the company was roughly sticking with current expectations. Harris said the potential reduction would be 1 or 2 cents per share.

For the first quarter, the company reported net income of $9.3 million, or 28 cents a share, compared with $1.4 million, or 5 cents, in the year-ago quarter. Analysts surveyed by First Call expected the company to make 22 cents a share. Harmonic's sales more than doubled to $62.9 million from $30.3 million.

The company's shares have traded in a range between $157.50 and $23.50 during the past 52 weeks.