S-A restructures manufacturing; CSFB cuts price target
Adelphia's Communications' much-documented woes, combined with the general economic malaise, has forced Scientific-Atlanta to shut down its third production shift at its Juarez, Mexico facility, resulting in the elimination of approximately 1,300 positions, or approximately 30 percent of the company's employees there, the company announced.
Company officials said current economic conditions have resulted in a softening in demand for equipment built there, including set-top boxes. Spokesmen further said that S-A is evaluating the need for any additional restructuring in other parts of the company due to reduced demand for our products.
Meanwhile, Credit Suisse First Boston said on Tuesday it cut its price target for S-A to $18 from $23 because of concerns about demand for the set-top-box and cable equipment maker's products.
CSFB said in a research note that it did not see enough of an uptick in spending at S-A customers to offset the impact of the bankruptcy of Adelphia. CSFB said it only expects modest incremental transmission business for Scientific-Atlanta from AT&T Broadband for the remainder of the 2002 with no sales for transmission systems to Adelphia or Callahan Associates until the second half of next year.
The investment firm cut its fiscal fourth quarter estimate for S-A to earnings of 23 cents per share from its previous estimate of 28 cents per share on revenue of $420 million, down from its previous estimate of $445 million. CSFB expects the company to earn 98 cents per share in 2003 compared with its earlier estimate of $1.28 per share on revenue of $1.65 billion compared with an earlier $1.82 billion forecast.