Brightpoint Inc. (CELL) provided disappointing preliminary estimates of fourth quarter 2009 financial results. Income from continuing operations on a GAAP basis is likely to be within the range of 22 cents to 26 cents. However, adjusted (excluding special items) EPS will be within the range of 12 cents to 17 cents. 

The mid-point of this range, 14.5 cents, is significantly below the Zacks Consensus Estimate of 17 cents. Brightpoint is a leader in global distribution of wireless devices and the provision of customized logistic services to wireless equipment manufacturers and carriers. Soft demand for wireless devices and precipitous reduction of average selling prices, attributed to the global economic recession, continues to impact the top-line.

The company estimates wireless devices handled to be approximately 22 to 24 million units for the fourth quarter of 2009, and approximately 81 to 83 million units for full fiscal 2009. This is a reduction of approximately 5% from fiscal 2008. 

Average daily debt was approximately $168 million in the fourth quarter of 2009, which is within the company’s previously estimated range of $150 million – $175 million. For fiscal 2010, the company anticipated more than 10% year-over-year growth in managed wireless devices. Full fiscal gross margin will be within the range of 8.4% – 8.6%.

The global macro-economic slowdown has significantly impacted Brightpoint’s operational volume level. The company is facing difficulties in all three markets, the U.S., Europe and Asia. We lack visibility as to the timing of when the company may reach its 15% stated ROIC level, with operating margin in the range of 2.5%-3%.

On a positive note, the company has reduced its debt level and spending. Improvement in operating cash flow generation is likely to strengthen earnings potential in the near future. According to our assessment, the long-run fundamentals of Brightpoint remain intriguing, primarily due to growing demand for 3G enabled smart-phones. We maintain our Neutral recommendation.
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