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Bay Networks sees 3Q drop
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March 17, 1998: 6:08 p.m. ET
Networking company cites lower revenue, but still expects a profit
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NEW YORK (CNNfn) - Bay Networks Inc. said Tuesday that weak product demand will push fiscal third-quarter revenue about 10 percent lower than the second quarter's.
The company added, however, that it expects to report a profit for the period.
Bay Networks reported second-quarter revenue of $645 million and a net income of $47.5 million, or 22 cents a share.
First Call anticipated earnings of 28 cents a share for the third quarter.
Bay Networks, which makes computer networking products for corporate enterprises, said the lower expectation is due to weaker-than-anticipated demand in many of the company's customer segments.
Based on the expected sales level, the company said, third-quarter gross margins will fall below the 51.5 percent reported in the second quarter. Despite that, it expects to post an operating profit for the third quarter.
The company also expects to take a charge of approximately $154 million, or 67 cents per share on a diluted basis, for the acquisitions of New Oak Communications Inc. and Netsation Corp., both of which were completed during the fiscal third quarter.
Dave House, Bay Networks chairman and chief executive officer, said that even with the slip in earnings the company's third-quarter revenue should be "meaningfully higher than the $513 million recorded in the year-ago quarter."
House added that he expects the company to exceed second-quarter results in the fiscal fourth quarter, citing upcoming new-product introductions that should boost revenue.
Shares of Bay Networks (BAY) fell 1-11/16 to 25 at Tuesday's close on the Big Board. 
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