Ariel's beats 1Q estimates but sales plummet

Communications-equipment maker Ariel Corp. (Nasdaq: ADSP) reported a smaller-than-expected loss in its first quarter, losing $2.9 million, or 30 cents a share, on sales of $3 million.

However, the Cranbury, N.J. firm watched its total sales fall more than 50 percent compared to the year-ago quarter when it lost $1.8 million, or 19 cents a share, on sales of $6.2 million.

First Call consensus expected it to lose 34 cents a share in the quarter.

Ahead of the earnings report, Ariel shares closed off 1/16 to 3 3/4.

Gross profit margins improved to 55 percent in the quarter, up from 41 percent in the first quarter of 1998.

Company officials said the dramatic drop in total sales reflects the company's transition away from PC integrators in favor of original equipment manufacturers and Internet service providers.

"Ariel's focus on technical original equipment manufacturers and Internet service providers will sharpen throughout 1999, and we expect the bulk of our 1999 revenue to come from these targets," said CEO Jay Atlas in a prepared release. "This new focus reflects our expectations that weak demand for remote access hardware from PC manufacturers and integrators targeting enterprise markets will continue throughout 1999."

First Call consensus expects Ariel to lose $1.16 a share in the fiscal year.

One of the two analysts following the stock rates it a "buy" while the other calls it a "hold."

The stock peaked at 9 3/4 last May before collapsing to a 52-week low of 1 1/2 in March.>