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PictureTel misses mark

The videoconferencing company's stock dips on word that its quarterly figures will miss analyst expectations.

Despite a jump in revenues and strong unit shipment, PictureTel (PCTL) announced today it will miss analyst expectations thanks to product price cuts and decreased demand for products in the United States.

The company's stock was down over 10 percent in early trading from yesterday's close of 11.

Although overall unit shipments were strong in the first quarter, revenues fell as the average selling price of its various videoconferencing systems were cut and customers shifted to the newer, lower-priced products, the company said.

Changes in product mix and a softening of demand in the United States, despite strong international sales, also contributed to the weak quarter.

"We previously announced that the first quarter would be below the fourth quarter by a three-to-five percent drop, but it is a little deeper than we thought," said company CFO Les Strauss. "We saw weakness in the ISDN desktop area and our new SwiftSite was pretty strong, but overall sales for the group systems are down a bit due to product mix."

Wall Street is expecting the company to report 21 cents a share, according to First Call.

Despite the anticipated drop in revenues, the company is encouraged by its strong unit shipments and the increased demand for new products.

"We are encouraged by the strength of unit shipments, particularly in the demand for the company's new compact videoconferencing system, SwiftSite. PictureTel's financial condition remains strong and management is confident of continued growth in revenue and profitability," said chairman and CEO Dr. Norman E. Gaut, in a prepared statement.

PictureTel had exceeded analysts' expectations when it reported a 38 percent rise in fourth-quarter net income to a record $9.9 million, or 28 cents per share, compared with $7.2 million, or 20 cents a share, a year earlier.

After announcing a record-setting fourth quarter in February, the company made cautious remarks about its first quarter of 1997.

That sent its share price plunging as much as 19 percent to pass its 52-week low of 17-1/8. The stock had traded as high as 26-5/8 in January, prior to remarks regarding the first quarter.

Some analysts are tagging 1997 as a transition year for the company.

According to a recent report by Advest Group analyst Herbert Maher, 1997 will be a year of progression, and 1998 holds promise as the LAN/Internet market for videoconferencing develops.

"Based on continued growth of the room system videoconferencing market, growth for the emerging LAN/Internet multimedia market and products to be introduced during 1997, plus the increased complexity of the Internet and the opportunity for providing network services, PictureTel is well positioned to compete and should have good earnings comparisons beginning in the third quarter," said the report.

"Sales were fabulous [from Swiftsite], and I recommend the stock, but not for a quick bounce. The company had a really great 1996, but the first half of '97 will be a transition year. Growth and momentum are important but will take a hit," said Maher in an earlier interview.

The company will release its quarterly earnings report on April 16.