US Report: Bay bashes Q4

Bay shares advanced 2 1/4 to 34 13/16 ahead of the announcement.

The company said sales of new products contributed more than 55 percent of revenues for the third consecutive quarter, fuelled by its network-switching product line, which grew 87 percent year-over-year. Including special charges related to the acquisitions of Netwave Technologies and Phase2 Networks, Bay pocketed $20.6m (£12.5m), or 9 cents a share, in the quarter. In June, Northern Telecom agreed to acquire Bay Networks for $9.1bn (£5.5bn), in an all-stock transaction. The deal is still pending government approval.

First Call consensus expected Bay to earn 12 cents a share excluding charges. The $618m (£376.8m) in sales represents a 13 percent improvement versus the year-ago period when it lost $118m (£71.95m), or 59 cents a share, on sales of $542m (£330.5m). Last quarter, it lost $144m (£87.8m), or 66 cents a share, on sales of $547m (333.5m).

For the fiscal year, Bay reported record sales of $2.41bn (£1.46bn), a 15 percent jump from the $2.09 billion it sold in fiscal 1997. For the year, it lost $34.8m (£21.21), or 16 cents a share. Excluding charges related to several acquisitions, Bay earned $118m (£71.95m), or 59 cents a share, in the fiscal year. "We had a strong finish to fiscal 1998 as indicated by the 13 percent sequential growth we achieved in the fourth quarter," said chief executive Dave House in a prepared release. "Revenue from North America hit record levels reflecting robust end-user demand. At the same time, channel inventories continue to be at healthy levels."

Bay shares hit a 52-week high of 41 7/8 in October before sliding all the way to 21 3/8 in late April. Fourteen of the 23 institutional investment firms following the stock maintain a "hold" recommendation. Analysts are looking for Bay to earn 96 cents a share in fiscal 1999.