Knobias Clip Report (07-25-2008) AFFX
Submitted By Knobias ClipReport
AFFX: Shares Plunge to Multi-Year Lows on Q2 Earnings and Lower Guidance
Shares of Affymetrix Inc (AFFX) fell to a multi-year low on Friday after the Comapny reported its operating results for the second quarter of 2008. Total revenue for the quarter was $86.9 million, as compared to total revenue of $88.3 million in the second quarter of 2007. The Company reported net loss of approximately $3.6 million or $0.05 per diluted share in the second quarter of 2008, which includes a pretax restructuring charge of $0.9 million or $0.01 per diluted share, as compared to net income of $1.2 million or $0.02 per diluted share in the second quarter of 2007, which included a pretax restructuring charge of $1.8 million or $0.03 per diluted share.
Due to ongoing weakness in the Company’s pharmaceutical revenue, the Company now expects 2008 revenue to be in the range of $455 million to $460 million.
Kevin M. King, President of Affymetrix, commented in a conference call last night, “We do not see pharmaceutical revenues improving during this year. Despite ongoing softness in this market, we continue to execute well in other areas of our business. We remain focused on our long term strategic plan to expand our market opportunities and improve revenue growth and gross margins. While we are making steady progress, it does take time to impact the income statement.”
The Company announced plans to consolidate manufacturing to three locations. These manufacturing consolidations are expected to improve capacity utilization, increase operational efficiencies and expand the Company’s product gross margin.
Affymetrix has also completed the acquisition of a privately held San Francisco-based company that develops digitally encoded microparticle technology for approximately $25 million in cash. This high performance and flexible platform technology will enable the Company to enter low to mid-multiplex markets and compete with bead-based platforms. In addition, this technology is applicable to the research, applied, and diagnostic markets.
Stephen P.A. Fodor, Ph.D., Chairman and CEO of Affymetrix, added, “We see solid growth for our consumables, and we are growing in new markets. We have also been working on a technology revision cycle that should fundamentally improve our cost basis and provide more flexibility.”
Before the market opened today, Baird downgraded AFFX to Neutral from Outperform. Deutsche Bank downgraded shares to Hold from Buy following the company’s disappointing quarter and guidance and lowered their target to $8 from $18. AFFX was also cut to Hold from Buy by Canaccord.
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