Hypercom Corp., still in the glow of its November initial public offering, has found it necessary to issue a profit alert.

The Phoenix-based company is best known for the point of sale terminals it sells to retail merchants, but its shortfall can be traced to the telecommunications networking business it has been in since 1992.

In an announcement last Tuesday, Hypercom said the economic problems in Asia are hampering sales of its enterprise networking systems.

"The POS terminal business is very strong," said Thomas Linnen, chief financial officer. "It's just not strong enough to offset the issues in the enterprise networking business," which accounts for 12% of revenue.

International sales accounted for 56% of Hypercom's $197 million of revenue in fiscal 1997, which ended in June. Sales in the Asian markets will be about $4 million in the two quarters through June 30, well below the $20 million originally anticipated by the company.

The IBES Inc. analysts' consensus estimate pegged Hypercom to earn 14 cents a share in the March 31 (third) fiscal quarter and 20 cents in the fourth quarter of 1998.

The company now expects to earn 8 cents per share in each of the two quarters. The news caused the stock price to fall 29% Tuesday, to $12.1875. The shares closed Friday at $12.3125.

Mr. Linnen said the company is considering a stock buyback program.

"I knew there were problems on the network systems side of the business in Asia, but it appeared they had it under control," said one analyst familiar with the company.

Salomon Smith Barney and Cowen & Co. downgraded Hypercom, while Lehman Brothers kept its "buy" rating.

"I think they all had their highest buy ratings on the stock," said the analyst, who requested anonymity. Hypercom officials "were giving no indication that it was that bad."

The company however is growing rapidly in its core market, which could make it an attractive investment. It has a multiple of about 19 times forward earnings, based on estimated earnings of about 66 cents per share in 1998.

"I still think the stock is pretty cheap," said the analyst. "The problem is that investor confidence is just horrible."

Second only to Verifone Inc.'s 45% share of the market for POS terminals, Hypercom has gained some ground in recent years at the expense of its chief rival. Hypercom's share is roughly 15%.

Mr. Linnen said Hypercom will keep close tabs on enterprise networking, which is used by large companies for cost-efficient voice and data telecommunications.

The company will redirect its energy toward larger corporate customers that could be more receptive.

Mr. Linnen said the company is considering an outright sale of the unit, which competes against such leaders as Cisco Systems Inc., 3Com Corp., and Bay Networks Inc.

"We will ride it out through this quarter and next quarter," Mr. Linnen said. "One way or another we will be on track going into fiscal 1999."

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