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Rockwell down on Q2 warning

The maker of chipsets, imaging devices, and wireless communications products suffers a downturn it blames on a PC modem sales slump.

Rockwell International's (ROK) stock dropped 10 percent in trading today after it warned that second-quarter earnings would be about 25 percent below what was recorded for the same period last year.

Rockwell blamed the downturn on customers who held off buying older products in anticipation of the new standards-based 56-kbps modems.

The company's stock fell 6-1/16 to end the day at 54-7/16, down 10 percent from yesterday's close of 60-1/2.

Oppenheimer & Company downgraded the stock to "hold" from "strong buy" following the earnings warning.

The maker of chipsets, imaging devices, and wireless communications products also said it will take a one-time charge of $10 million in the quarter to account for a restructuring of its semiconductor systems business.

As a result of the restructuring charge and weak sales of its personal computer modems, second-quarter income will fall short of the 71 cents it earned in the second quarter of 1997, Rockwell said.

Analysts had expected earnings of 74 cents a share, according to First Call.

Rockwell said demand for v.34 and 56-kbps modem products were weaker than it planned as customers withheld orders during January and February awaiting release of its new interoperable v.90 modem chipsets, the recently approved standard for 56-kbps modems.

Rockwell started shipping the standard-compliant product in late February.

The company said it is still experiencing significant pricing pressure on the new v.90 product. The semiconductor systems business "will not recover in the second half of our fiscal year to the extent we previously anticipated," Don Davis, Rockwell chairman and chief executive, said in a statement.

The company also said despite strength in its Automation and Avionics & Communications business, in 1998 it will generate earnings flat with 1997's earnings of $2.89 per share, while analysts had expected earnings for the year of $3.18.