Brightpoint Falls Below Revenue Expectations
Brightpoint Inc. (CELL), a leading distributor of mobile devices and logistic services to the wireless industry, declared preliminary estimates of its second quarter 2009 financial results. The company’s revenue projection of $722 million – $727 million is significantly below our expectation of $770 million.
We believe the global macro economic slowdown had a major impact on Brightpoint’s operational volume. Management has indicated that the company managed approximately 18 million-19 million mobile devices during the second quarter, which remains almost flat with respect to the previous quarter.
We expected around 22 million of wireless devices during the same quarter prompted by the solid global customer base of the company. Brightpoint has entered into agreements with large telecom carriers and handset makers, such as like Research In Motion (RIMM), HTC Corp, Garmin Ltd (GRMN), ZTE, Nokia (NOK), Verizon Wireless (VZ) and T-Mobile for the distribution of their handheld devices.
The second quarter 2009 preliminary financial estimate of Brightpoint, however, has some positive signs. Despite weak top-line, adjusted (non-GAAP) diluted EPS of $0.07-$0.13 is in line with our expectations. The acquisition of Dangaard Telecom has strengthened the company’s geographic presence, product offerings and margins. Starting in 2009, $25 million – $30 million of annual cost savings from this acquisition are forecasted by management.
Outstanding debt of approximately $95 million – $97 million is well below the company’s projection of daily average debt burden of $100 million – $150 million. This will reduce interest expenditure. Cash & cash equivalents of approximately $74 million – $76 million at the end of the same quarter is a considerable improvement over $54 million of cash at the end of the previous quarter.
Brightpoint has improved its market share in the emerging markets of Latin America, India and China. However, given the tepid outlook provided by various large wireless handset makers and industry research sources, we do not expect any improvement of the company’s top-line in 2009. We maintain our Hold recommendation for Brightpoint.
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