re;rcm being takeover RuggedCom Inc. Shares Lower Despite Strong 4Q Results
By Stuart Weinberg and Jennifer Walter, OF DOW JONES NEWSWIRES
TORONTO -(Dow Jones)- RuggedCom Inc. (RMC.T) is down sharply Thursday despite reporting strong fourth-quarter results Wednesday. Fourth-quarter revenue rose 52% to a record $17.4 million, and earnings shot up by almost 50% to $3.4 million, or 28 cents a share.
Genuity analyst Deepak Chopra said RuggedCom's stock had risen dramatically this year (107% at Wednesday's close), so profit-taking could be one reason for Thursday's sell-off. Chopra also noted the overall market is down sharply Thursday.
Marzio Pozzuoli, RuggedCom's president and chief executive said in a conference call Thursday that the company saw growth in the electrical and military sector, but did experience some downturn in the industrial sector. Pozzuoli noted this slowdown isn't surprising, as the industrial segment encompasses the oil-and-gas and mining sectors, both of which have been hit hard by the global recession.
Pozzuoli also told analysts he sees significant opportunity for growth in the military segment, but added that increased exposure to military customers means RuggedCom will have to adjust to some volatility in quarterly revenue.
While volatility may increase, Chopra said he thinks RuggedCom's long-term fundamentals remain intact. The company is adding customers at a torrid pace, and average sale per customer is inching higher. In the latest quarter, the company's average sale per customer rose to $42,000 from $35,000 in the year earlier period, he said.
A second analyst said RuggedCom's core electrical-utility business remains strong, but fast-money investors may be looking to take a pause at this point, given the slowing orders in the industrial segment.
The analyst said RuggedCom could be a takeover target, noting it has a seven- year competitive lead nd a wide installed base. "Those are valuable things" in the industry, the analyst said.
Cisco Systems Inc. is the company most frequently mentioned as a potential RuggedCom suitor.
RuggedCom sells communications networking solutions for harsh environments, including electrical substations, oil refineries and military operations.
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