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Tektronix tops estimates, warns of slowing sales

Tektronix topped analysts' estimates in its third quarter Thursday but warned that the economic slowdown crippling other chip and chip-equipment makers will result in lower-than-expected sales in its fourth quarter.

In the quarter, Tektronix (NYSE: TEK) raked in $35.5 million, or 37 cents a share, on sales of $326.9 million.

First Call consensus expected the manufacturer of test, measurement and monitoring equipment for the semiconductor industry to earn 32 cents a share on sales of $313.8 million.

Tektronix shares closed off 34 cents to $24.66 ahead of the earnings report.

"I am pleased that we delivered another quarter of very strong financial results," said Chief Executive Officer Rick Wills in a prepared release. "We saw particular strength in our optical test products, logic analyzers and high-end scopes."

However, company executives now expect fourth-quarter sales to improve only 10 percent to 12 percent from the year-ago quarter, resulting in sales growth of only 20 percent for the fiscal year. Operating margins are expected to check in at between 14 percent and 15 percent.

In fiscal 2000, Tektronix returned a profit of 83 cents a share on sales of $1.12 billion.

"We are beginning to experience the effects of the weakness in the market through a slowing in our order rate," Wills said in the release. "The economic impact on many of our core customers is apparent, and we have traditionally lagged our customers in a slowdown period. At this time, we expect to see orders decline around 10 percent next quarter."

Ahead of the earnings report, J.P. Morgan analyst Dan Kunstler predicted Tektronix would earn 31 cents a share on sales of $311 million.

"Tektronix is suffering from some of the same problems that Agilent is facing," he said. "I expect the quarter to be in line with estimates but think there's a decent likelihood they will lower guidance going forward," he said.

Last quarter, Tektronix easily topped Street estimates when it posted a profit of $36.7 million, or 38 cents a share, on sales of $325.1 million.

Its shares rallied up to a 52-week high of $43.66 in July after bottoming out at $22 in April.

"At this valuation, regardless of what they say about the fourth quarter, the stock is trading at a significant discount," Kunstler said. "Investors willing to weather the near-term storm will find a pretty good investment opportunity."

Seven of the nine analysts tracking the stock rate it either a "buy" or "strong buy."