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CNT sees 4Q flop
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January 3, 2000: 6:46 p.m. ET
Expecting 4-cent loss, compared with forecast for 13-cent profit
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NEW YORK (CNNfn) - Computer Network Technology Corp. on Monday warned investors that its fourth-quarter sales and earnings will be considerably lower than Wall Street’s expectations, blaming the shortfall primarily on a slowdown in customer purchases ahead of the New Year.
After the closing bell on Monday, CNT (CMNT) -- a Minneapolis-based provider of hardware and software products for computer networks -- said it expects to post a loss of 4 cents per diluted share for the quarter, excluding one-time charges. Analysts polled by First Call had expected the company to earn 13 cents per share during the quarter.
The company's 1999 fourth-quarter forecast includes a one-time charge of roughly 6 cents per share.
Shares of CNT slid more than 22 percent ahead of the news, ending the session 5-3/16 lower at 17-3/4 in volume more than five times greater than average. The stock shed another 7/8 to 16-7/8 in after-hours activity.
In the waning days of 1999, many companies had, as a safeguard against potential Y2K problems, deferred purchasing new computers or software until after the year 2000 date change. The Y2K problem results when a computer system does not recognize the first two digits of a year, thus interpreting 2000 as 1900.
But during the last two weeks of December, the sales slowdown was more than CNT executives said they had expected. As a result, the company, which typically receives 60 percent of its product orders during that time period, likely will post revenue of roughly $36 million, compared with $35.9 million during last year’s fourth quarter, executives said.
"We believe that the fourth-quarter revenue shortfall was primarily attributable to a purchasing lock-down and budget deferrals, probably Y2K related, by our customers during the last two weeks of 1999,” said Thomas Hudson, chairman, president and chief executive officer. "There has not been any fundamental change in our business."
The company stressed that the performance of CNT's products during the year 2000 rollover has been uneventful to date.
CNT also said it was considering spinning off its Enterprise Integration Solutions division to focus on its networking solutions division.
That division has posted revenue increases of roughly 45 percent during 1999 to $6.3 million and has exceeded the revenue growth in its core storage area network product revenue for the past two years, making it ripe for such a move, according to Hudson.
"We feel that the division has now reached a size where it would create more shareholder value if it were a separate entity," he said. 
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