Zagg slashes sales forecast as Apple delays new products

Thu May 2, 2013 7:03pm EDT

(Reuters) - Zagg Inc (ZAGG.O), which makes scratch guards for mobile and tablet devices, slashed its full-year sales forecast, citing delays in product launches by Apple Inc (AAPL.O).

Shares of the company fell 26 percent to $5.10 in after-market trading.

Zagg, whose products are used for Apple iPhones and iPads, cut its full-year sales forecast to $274 million-$280 million from $313 million-$318 million.

"The most significant change in guidance is due to Apple delaying new device launches until later this year," a company executive said on a conference call with analysts.

Sources in Japan and Taiwan, home to dozens of Apple suppliers, told Reuters last month that they initially expected mass-production of the next iPhone to begin in June but that date may have begun to slip.

"When Apple does new products, that drives business for Zagg, so if there's no new product, they're not going to get their kicker," Ladenburg Thalmann & Co analyst Jon Hickman told Reuters.

Zagg's net income fell to $876,000, or 3 cents per share, in the first quarter, from $5.1 million, or 16 cents per share, a year earlier.

Excluding items, the company earned 11 cents per share, way short of the 21 cents analysts had expected, according to Thomson Reuters I/B/E/S.

Revenue fell 7 percent to $51.5 million, below expectations of $66.5 million.

Gross margin in the quarter fell as the company's 9-inch keyboard, especially made for iPad mini, was not well accepted.

"They had a 9-inch keypad for a 7-inch device, and people just found that cumbersome," analyst Hickman said.

Gross margin fell to 37 percent from 49 percent a year earlier.

The company, whose largest customers in the quarter were Best Buy Co Inc (BBY.N) Inc and Wal-Mart Stores Inc (WMT.N), also ended contracts with some of its distributors.

Zagg shares closed at $6.88 on the Nasdaq on Thursday. They have fallen about 9 percent in the last three months.

(Reporting by Supantha Mukherjee and Chandni Doulatramani in Bangalore; Editing by Maju Samuel and Sriraj Kalluvila)

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