SCM crumbles on 2Q warning

SCM Microsystems Inc. (Nasdaq: SCMM) crumbled 36 percent Thursday after it said second-quarter earnings will be lower than expected due to weak sales of its digital media readers.

SCM, which makes data security and access control hardware and software, said it expects net revenues of $29 million to $31 million in the quarter, an increase of 10 to 17 percent compared with net revenue of $26.4 million in the second quarter of 1999, when the company also issued a profit warning.

Including one-time items, SCM expects to report net income of $1.1 million to $1.7 million, or 7 to 11 cents a share for the second quarter. Those financials compare with a net loss of $3.3 million, or 23 cents a share for the second quarter of 1999. First Call was expecting a profit of 22 cents a share.

Shares were down 32 1/4 TO 57 1/16, or 36 percent on the news.

SCM's revenue and gross margin in the second quarter are expected to be impacted by lower than expected sales of SCM digital media readers, which are bundled with MP3 Internet music players, as well as by lower than expected shipments of SCM readers for PC security.

The company also said Thursday it has completed the acquisition of Microtech International, a provider of digital photography software for the consumer and business markets. SCM is paying about $20 million of cash and stock to purchase Microtech; the deal includes performance-related payments of up to $5 million.

The company said the strength of its digital TV and broadband access business, coupled with the purchase of Microtech, will allow it to maintain growth momentum.

SCM will announce final results for the quarter on July 20.

The company's competitors include Philips Electronics (NYSE: PHG), and Hitachi (NYSE: HIT), according to Hoover's Online.