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Fore reveals poor sales

Preliminary fourth-quarter results show poor sales due to weak international demand and the rigors of competition.

Fore Systems' (FORE) stock tumbled 13 percent in trading today after it reported preliminary fourth-quarter results.

In morning trading, the stock fell as low as 33 percent to 10, before finishing the day at 13-1/16, down 1-15/16 from yesterday. Fore's announcement made public a slowdown in sales due to weak international demand and increased competition.

Fore's stock traded as high as 35 in February before dropping 17 percent on March 7 on rumors that Japanese revenues would not meet expectations.

Earnings, prior to a one-time litigation settlement, are expected to be between $9 million and $10 million, or 9 cents and 10 cents a share. The Wall Street consensus, however, was 15 cents a share, according to First Call.

Including the one-time charge for the quarter ending March 31, the company expects to report net income of $750,000 to $1.75 million, or 4 cents to 5 cents a share, compared with a net loss of $9.6 million or 11 cents a share for the same period a year ago.

Revenue for the fourth quarter of fiscal 1997 is expected to be between $100 million and $103 million, an increase of about 35 percent over last year's fourth-quarter revenues of $75.3 million.

"The international mix had declined with weakness in Asia, but there was pressure internationally all around. In past quarters we were able to make up Asia and Pacific shortfalls, but European business declined overall," said Eric Cooper, chief executive. "Product mix remained consistent, but overall market demand fell."

Cooper said that the strong dollar other companies have cited as a factor for slowing growth is not an issue for Fore. "We go through a distributor that has the ability to absorb those changes."

Competition in the industry also squeezed profits as competitors moved further into its market.

"All the networking vendors are broadening their offerings and encroaching on us. Cisco Systems and 3Com compete directly with our offerings and the level of competitiveness has increased," said Cooper.

He added that Fore plans to temper expansion that it aggressively launched last year.

"The enterprise networking market and service provider market have strong product offerings, so we don't need to broaden it, just to concentrate on it," he said.

Fore plans to announce its fourth-quarter results on April 24.