The Wall Street Journal-20080115-Business Technology- Harman Lowers 2008 Profit Estimate
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Business Technology: Harman Lowers 2008 Profit Estimate
Harman International Industries Inc., the audio equipment and electronics maker that was sought in an $8 billion leveraged-buyout plan that was abandoned because of an unacceptable outlook, cut its fiscal 2008 earnings estimate.
Citing recent "significant pricing pressure" on in-car GPS devices, the Washington, D.C., company, which makes audio equipment and electronics, now expects per-share earnings of $3 to $3.10 for the year ending June 30.
In September, Harman said it expected fiscal 2008 earnings to meet or exceed 2007's adjusted earnings of $4.14 a share. At the time, Wall Street was projecting earnings of $4.87 a share; the most recent mean earnings estimate of analysts surveyed by Thomson Financial was $4.31 a share.
The profit warning pushed down the stock. In 4 p.m. composite trading on the New York Stock Exchange, it slid 38% to $43, down from $68.97 Friday.
Kohlberg Kravis Roberts & Co. and Goldman Sachs Group Inc.'s equity arm walked away in September from their planned buyout of Harman, saying they found financial conditions at the stereo maker to be unacceptable.
"While the growth fundamentals of our core business remain sound, the difficult [portable navigation device] environment presents a challenge," said Chief Executive Dinesh Paliwal in a statement.
The company said it is planning to step up research and development spending on new car "infotainment platforms" it plans to launch in 2008. Global-positioning systems, or GPS, now do far more than simply tell you where you are or how to get somewhere. Many can play mp3 music and display photos.
"Although we are not happy with the higher-than-planned R&D engineering and material costs, the additional investment is necessary to deliver the new platforms to our valued customers," Mr. Paliwal added.
