Asia sends wrong message to Charlotte beeper keeper.

• Author: Speizer, Irwin
• Position: Asian crisis affects North Carolina-based Glenayre Technologies Inc.'s stock value

When Charlotte-based Glenayre Technologies Inc. took a first-quarter hit from the Asian financial crisis, the company shrugged it off as a short-term setback. Management emphasized that its biggest foreign market is China, which was relatively strong. Sure, nearly half its work building paging-network infrastructure is overseas, up to half of that in Asia, but Glenayre (GEMS-NASDAQ) promised the continent was on its way back.

Rather than sailing through the crisis, Glenayre sank, taking a boat-load of optimistic analysts with it. In contrast to management's rosy projections, the company delivered dismal results for the second quarter, too. Wall Street exacted a swift revenge. A stock that was already well off its all-time high of $52.50, which it hit in mid-1996, has dropped to about $7, right at its book value. Even at that price, it's hard to justify loading up, given Glenayre's uncertainties.

"After the first quarter, they painted a very bullish picture regarding the international market, particularly Asia," says Bo Fifer, an analyst with BT Alex. Brown Inc. "The tone was, 'Hey, Asia is not only not killing us, but we expect it to contribute to our growth.'"

It didn't. To compound matters, a rash of production problems cropped up in the second quarter. Parts didn't arrive on time, a new manufacturing process didn't work, inventory-management software crashed. The result was a $30 million to $40 million order backlog.

Analysts had predicted a consensus gain of 15 cents for the second quarter. The numbers came in at break-even, with sales down 26% from a year earlier and an operating loss of $1.4 million, compared with a profit of $21 million a year earlier.

1998 was supposed to be the turnaround after Glenayre lost $78 million, $1.29 a share, in 1997, due to a $125 million charge for three acquisitions. But bad turned to worse. First quarter 1998 sales were off 11%, and profits of 5 cents a share were down from 22 cents a year earlier.

The company's first mistake came in April: telling analysts business would pick up. When it didn't, instead of giving Wall Street an early warning, Glenayre kept quiet. Once the second-quarter numbers were in, the company phoned analysts to break the news. Bradley Williams of Legg Mason Wood Walker Inc. recalls the surprise call he got. "They said, 'You are going to see a press release tomorrow morning, and it is not going to be pretty.' No one likes to hear bad news. But they want to be communicated with...