Shortages of key components cost Hypercom Corp. $6 million in second-quarter product revenue, despite strong demand for the company’s point-of-sale products and services, says Philippe Tartavull, Hypercom CEO and president, during an Aug. 4 conference call to discuss earnings with analysts.
Hypercom reported a $1.26 million net loss for the quarter ended June 30; the Scottsdale, Ariz.-based company earned a $1.26 million profit during the same quarter in 2009. Revenue dropped 1.6%, to $103.9 million from $105.6 million.
The component shortages have pushed production lead times to between 18 and 22 weeks from six to eight weeks previously, Hypercom says. Tom Sabol, Hypercom chief financial officer, now is overseeing the company’s supply-chain activities to try to correct the situation.
Problems surfaced with some of Hypercom’s semiconductor manufacturers and distributors and other suppliers reneged on their equipment commitments during the quarter, Sabol told analysts during the conference call.
Lack of semiconductor availability is occurring throughout the electronics industry because makers cut back during the recession and have been unable to accommodate the resurgence in demand, according to industry publication Electronics Weekly.
“We are focusing on improving our visibility with key suppliers and with our [electronic manufacturing services] partners to ensure the availability of components in order to timely build and ship products,” Sabol said.
Actions taken now to correct the shortage likely will minimize the impact on third-quarter revenue, he said.
The component shortage also affected Hypercom’s profitability for the quarter because some sales in higher-margin markets could not be made, Sabol said.
The demand was there to buttress Hypercom’s financial performance, but the component shortage hampered that, says George Sutton, senior research analyst at Craig-Hallum Capital Group LLC, a Minneapolis-based investment research firm.
Gil Luria, vice president of equity research at Wedbush Securities, similarly was disappointed by the quarter’s results.
“Overall, Hypercom’s results were a little disappointing in terms of revenue and gross margins, but lower operating expenses mostly made up for that,” he tells PaymentsSource. “The component shortage was the biggest issue, as they had a significant amount of merchandise ready to go, and missing only one to two semirelated components. Ingenico mentioned a similar issue on their conference call, but their issue was at a lower magnitude.”
Demand for Hypercom’s products is a good sign, Robert Dodd, analyst at Morgan Keegan & Co., tells PaymentsSource. “That’s a plus,” Dodd says. “It’s unclear if that it is a broad-based pick up or pent-up demand.”
Dodd, meanwhile, expressed concern about the component-shortage issue. “They’ve been trying to fix it, and so far they haven’t managed to pull it off,” he says. “They’re convinced they’re going to fix it this time.”
Sabol is hopeful. “We are working with all of our key suppliers to ensure that we have an assured supply associated with our forecast with our sales volumes,” he told analysts.
Hypercom reported a $2 million foreign-exchange charge that affected quarterly revenue. Regionally, revenue growth was mixed.
Hypercom reported $32.9 million in revenue in the Americas, a 9.1% decrease from $36.2 million a year earlier. Northern Europe generated $23 million in revenue, down 5% from $24.2 million. Southern Europe reported the best revenue growth, rising 7%, to $33.8 million from $31.6 million
Asia-Pacific revenue was down 3.7%, to $14.1 million from $13.6 million.
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