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Circuit board maker Merix drops on earnings warning

Despite topping estimates for its second quarter, the company watches its shares drop more than 50 percent after warning that third-quarter numbers will fall short.

    Despite topping estimates for its second quarter, circuit board maker Merix watched its shares drop more than 50 percent after the company warned third-quarter numbers would fall short.

    Shares in the Forest grove, Ore.-based company, which makes circuit boards for communications, computing and medical devices, closed regular trading down $12.81 to $12.31, after hitting $11.38 early in the day.

    For its second quarter, the company came in with net income of $10.2 million, or 70 cents a share, on revenue of $58.4 million, topping analysts' estimates of 67 cents a share. Earnings improved both sequentially and year over year, as did revenue, which bumped up 63 percent from the year-ago period and 14 percent sequentially.

    But the strong quarter was overshadowed by the lowered guidance for the upcoming quarter.

    According to the company, postponement or cancellation of orders previously placed and a slowdown in demand from customers will "significantly reduce premium revenue" in the last half of fiscal 2001. The softening in demand will reach across all of the company's market segments.

    Merix now expects sales in the third quarter to be between $49 million and $51 million, with earnings per share in the 44 cent to 48 cent range, well below First Call/Thomson Financial's 69 cent a share estimate. The company sees some improvement in the fourth quarter, with sales and earnings improving sequentially: 15 percent and 25 percent, respectively.

    "We believe the overall fundamentals of our business remain solid, and we expect current demand conditions to be a short-term issue," said the company's CEO, Mark Hollinger.

    Separately, Merix said it has signed an agreement with Teradyne to supply the testing equipment firm with high-end printed circuit boards.