UPDATE 1-Sierra Wireless forecasts first-quarter loss on higher costs

Wed Feb 6, 2013 7:09pm EST

* Forecasts Q1 loss per share $0.05-$0.08 on higher costs

* Expects strong revenue growth in Q2

* Company beats estimates in Q4

By Krithika Krishnamurthy

Feb 6 (Reuters) - Canadian wireless communication equipment maker Sierra Wireless Inc said higher operating costs will result in a first-quarter loss, even after posting a profit that beat analysts' estimates in the latest three months.

The Vancouver-based company forecast a loss in a range of 5 to 8 cents per share for the first quarter, due mainly to higher certification costs for new products and a strengthening euro.

Sierra sells mobile broadband devices, embedded modules, gateways, routers and cloud platforms to distributors and Original Equipment Manufactures (OEMs), which integrate them in devices like e-reader, payment terminals and notebooks.

The company said in a statement that it expected revenue of between $98 million and $102 million in the first quarter.

Sierra, which sold part of its mobile broadband business to Netgear Inc for $100 million last month, reiterated its intention to use the proceeds for acquisitions in the machine-to-machine business that enables data transfer.

After a first-quarter loss, the company expects solid revenue growth in the second quarter of 2013, Chief Financial Officer Dave McLennan said on a conference call with analysts.

The stock is currently trading at about 12 times analysts' expectations for fiscal 2013 earnings, according to Thomson Reuters data.

"The company is setting a base for growth," said Avondale Partners analyst John Bright. He identified short-term organic growth of 10 percent to 15 percent, as well as acquisitions, cost management and the buy-back of shares as the catalysts for growth.

PROFIT BEATS ESTIMATES

Sierra earned $19.6 million, or 64 cents per share, in the fourth quarter, compared with a loss of $13.8 million, or 44 cents per share, a year earlier.

Revenue from continued operations rose 33 percent to $109.4 million. Total revenue rose 11 percent to $163.8 million, buoyed by a 40 percent sales increase in its machine-to-machine business.

On an adjusted basis, the company earned 33 cents per share, much higher than the average analyst estimate of 20 cents per share, according to Thomson Reuters I/B/E/S.

Sierra reported revenue of $15.5 million from the machine-to-machine business acquired from France-based Sagemcom in 2012. This was equivalent to 14 percent of the company's total revenue in the fourth quarter.

Shares of Sierra, which has a market value of about $355 million, closed at C$11.60 on the Toronto Stock Exchange on Wednesday.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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