Elcom beats 4Q estimate, sales fall

Elcom International, Inc. (Nasdaq: ELCO) said Friday that its fourth quarter and fiscal year revenue had been hurt by marketing costs, restructuring, and new guidelines that restricted sales. Fourth quarter loss was 38 cents a share, just beating First Call's expected loss of 40 cents a share.

Shares in the company, which develops and licenses automated procurement e-commerce software, fell 1 3/8 to 23 5/8, or 6 percent Friday. The stock has been climbing since November, when the company announced a partnership with Seagate (NYSE: SEG). It also spiked recently on a rally in B2B shares.

Net sales for the quarter ended December 31, 1999 were $70.7 million versus net sales of $186.8 million in the comparable quarter of 1998. Operating loss was $11.2 million, compared to an operating loss of $9.5 million reported in 1998's fourth quarter. Net loss was 38 cents a share, compared with a loss of 46 cents a share in the fourth quarter of 1998.

For 1999, net sales decreased to $485.8 million, compared to 1998 net sales of $763.6 million. Elcom said the decrease was due to its sale of the company's U.K. operations in July, 1999.

The company's reduced sales levels also resulted from its choice to imposed more stringent payment and credit terms on its customers, causing it to give up sales opportunities. It also decided not to accept inventory risks. The company's balance sheet also shows a sharp reduction in inventory from $39.6 million as of December 31, 1998 to $1.5 million as of December 31, 1999.

Elcom reported a net loss of $42.5 million, or $1.53 a share in 1999 compared to a net loss of $25.6 million, or $94 cents a share reported in 1998. First Call's consensus estimate had predicted yearly loss of 1.52 a share.

Operating loss for the year was $40.6 million, compared to an operating loss of $17.4 million recorded in 1998. The loss included the restructuring and other related charges of $19.5 million, resulting from the sale of the U.K. operations. A portion of this operating loss also came from the marketing and branding campaign for elcom.com, the company's eBusiness subsidiary.

The company, which said it sees remotely-hosting applications is the way of the future, is positioning elcom.com for a possible IPO and subsequent spin-off to Elcom International stockholders. It continues to work with Wit Capital to this end, and has started to explore joint-venture Vertical Digital Marketplaces [VDM] with selected partners in vertical or geographical markets. The company said it may partner to form a joint-venture subsidiary, and float it, possibly in a host country.

Full financial results will be included in its annual report expected to be filed with the SEC in the next several weeks, the company said