Digital Microwave zapped after 2Q miss

Digital Microwave Corp. (Nasdaq: DMIC) got fried Tuesday, burning up 15 percent, after the company reported second quarter earnings of 2 cents a share, missing First Call's estimate by a penny.

Shares of the San Jose, Calif.-based maker of wireless communications equipment were down 2 9/16 to 14 in early trading.

"A great buy" said Dale Pfau of CIBC World Markets, who recently upped his price target on the stock to $30. He said he doesn't see the fact that the company missed consensus estimates slightly as a big deal. "Demand was strong but some components didn't arrive on time. So they missed the top line by about $3 million," he said.

Shares have been on an even keel since the company warned October 9 that it would fire 200 workers and cut its executives' salaries 10 percent after completing its acquisition of Innova Corp. It said it was expecting a third quarter charge as much as $30 million for the restructuring.

Net income for the fiscal second quarter was $1.3 million, or 2 cents a share, compared to a net loss of $11.1 million or 18 cents a share for the second quarter a year ago.

The company reported sales were $68.5 million, a 24 percent increase in sales compared to $55.3 million for the second quarter of the prior year.

As a result of its merger with Innova Corporation on October 8, 1998, which was accounted for as a pooling of interests, Digital Microwave has restated financial results for its prior periods.

During its second quarter, the company received $71.2 million in new orders, compared to $57.7 million in the second quarter of fiscal year 1999, an increase of 23 percent. The backlog at Sept. 30 was $68.4 million.

"Product developments this quarter cemented our differentiation in the arena of high-capacity wireless broadband access. We have now announced that the Altium radio product line rollout will be completed by December of this year for all frequencies except 38 GHz, which will be available in early 2000," said Charles D. Kissner, CEO in a company release. He called the Altium radio "the most deployable and most spectrally efficient wireless broadband access product on the market." Revenues from the Altium radio products more than doubled during the quarter.

The company also announced Tuesday that it has entered into a sales agreement with a major telecommunications infrastructure provider. The non-exclusive agreement has an estimated value in excess of $100 million over a three-year period. The products are to be deployed globally in developing and expanding communications networks used for broadband wireless access, cellular and other types of telecommunications services, the company said.