Shortages of key components cost Hypercom Corp. $6 million in revenue in the second quarter despite strong demand for point of sale terminals and payments services.
The Scottsdale, Ariz., company reported a loss of $1.3 million, compared with a $1.3 million profit for the second quarter of 2009. Hypercom's revenue fell 1.6%, to $103.9 million.
The shortages have pushed production lead times from six to eight weeks to between 18 and 22 weeks, Hypercom said.
Tom Sabol, Hypercom's chief financial officer, now is overseeing its supply chain in an effort to correct the situation.
Hypercom's semiconductor manufacturers and distributors, and other suppliers reneged on some of their commitments during the quarter, Sabol told analysts during a conference call Wednesday.
"We are focusing on improving our visibility with key suppliers and with our [electronic manufacturing services] partners to ensure the availability of components in order to timely build and ship products," Sabol said.
Actions that are being taken now to correct the shortage situation likely will minimize the impact on Hypercom's third-quarter revenue, he said.
The component shortage also affected Hypercom's profit margin for the quarter, because some sales in higher-margin markets could not be made, Sabol said.
Analysts were not impressed by the results.
"Overall, Hypercom's results were a little disappointing in terms of revenue and gross margins, but lower operating expenses mostly made up for that," said Gil Luria, a vice president of equity research at Wedbush Securities.
"The component shortage was the biggest issue as they had a significant amount of merchandise ready to go and missing only one to two semi-related components."
Still, strong demand for Hypercom's products is a good sign, said Robert Dodd, an analyst at Morgan Keegan & Co. "That's a plus," Dodd said. "It's unclear if that it is a broad-based pickup or pent-up demand."
However, Dodd expressed concern about the component shortages. "They've been trying to fix it and so far they haven't managed to pull it off," he said. "They're convinced they're going to fix it this time."
Sabol said he is hopeful. "We are working with all of our key suppliers to ensure that we have assured supply associated with our forecast with our sales volumes," he told analysts.
Hypercom also had a $2 million foreign exchange charge that affected revenue.
Regionally, revenue growth was mixed in the quarter.
Hypercom's revenue in the Americas fell 9.1%, to $32.9 million. Revenue in Northern Europe fell 5%, to $23 million.
Southern Europe had the best revenue growth, 7%, to $33.8 million. Revenue in the Asia-Pacific region increased 3.7%, to $14.1 million.
