PairGain, Western Digital Shares Plunge
TUSTIN — It was a bad day on Wall Street for two of Orange County’s most prominent high-tech companies, PairGain Technologies Inc. and Western Digital Corp.
Shares of telecommunications equipment maker PairGain fell 10.1% Monday, or $1.75 a share, to $15.50 after an analyst lowered his earnings estimates for the company on concerns about the impact of competitive price cutting in the industry.
Similar concerns about the impact of price cutting on disk drive makers’ profits spurred a sell-off that lowered Irvine-based Western Digital’s stock by $4.25 a share, or 6.4%, to $61.75 on the New York Stock Exchange.
The trading pace made PairGain the nation’s most active issue for the second consecutive trading day as 18.7 million shares changed hands on the Nasdaq exchange. A similar report by another analyst Friday touched off a frenzy that cut PairGain’s stock price by 18% as more than 19 million shares were sold.
However, the analysts who issued the reports said they continue to believe that PairGain is a healthy stock, and that investors should be purchasing it.
A research assistant for analyst Nikos Theodosopoulos at UBS Secrities Inc. said Monday that the report that drove the day’s heavy trading does not negate an earlier “buy” recommendation. At $15.50, the stock is “a bargain,” the assistant said.
Although Theodosopoulos lowered his earnings estimate, he still is projecting that PairGain’s profit per share will climb by 43% in 1997. He is projecting earnings of 73 cents a share, down from an earlier estimate of 81 cents, and has lowered his estimate for 1998 to 93 cents per share from $1.05.
The average 1997 earnings estimate for PairGain by other analysts is 79 cents a share, while 1998 averages range from $1.03 to $1.05 a share.
PairGain posted a 1996 profit of $36.6 million, or 51 cents a share.
But the company faces increased competition from other makers of equipment that transmits voice and data at fast speeds, including Alabama-based Adtran Inc. and Minnesota’s ADC Telecommunications Inc. Adtran has cut prices steeply on the high-speed data transmission products, known as HDSL.
Theodosopoulos said he expects prices for HDSL equipment to fall as much as 27% this year, significantly more than the traditional declines driven by manufacturing and marketing efficiencies.
PairGain’s stock woes are pretty much its own--Adtran shares were off just 50 cents at $28 and ADC’s share price rose 6 cents to $31.44.
Western Digital’s shares fell in step with major competitors Seagate Technologies Inc. and Quantum Corp. after a flurry of analysts’ reports that disk drives may soon be in oversupply and that prices and profits could start falling.
Investors dumped just over 3 million shares of Western Digital. But they sold nearly 5.7 million shares of Scotts Valley-based Seagate, driving the price down $3.25 to $45.25 a share on the Big Board. Milpitas-based Quantum’s stock slumped by $4.44 a share to close at $40.75, as almost 7.1 million shares changed hands in Nasdaq trading.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
PairGain Loss
Shares of telecommunications equipment maker PairGain Technologies fell 10.1% Monday, tumbling $1.75 to finish at $15.50. Weekly closing stock prices and Monday’s close:
Monday’s close: $15.50 Source: Bloomberg News; Researched by JANICE L. JONES / Los Angeles Times
