Thursday, December 04, 2008

March Networks Plans Layoffs on Global Recession Concerns.

March Networks is planning more layoffs as a safeguard against a global recession undercutting its growth plans.

The Ottawa maker of digital surveillance equipment said yesterday that it is shutting a software development operation in Scottsdale, Arizona, and consolidating operations here. The cuts at the former Trax Retail Solutions acquisition will reduce the number of employees by seven per cent to to 275. Some new jobs will be created in Ottawa.

March cut about 20 other jobs, primarily in Ottawa, during the summer. It also ended contracts of product developers in India.

March said yesterday that losses jumped 53 per cent in the second quarter, ending in October, due to $1.4 million in costs related to layoffs and other restructuring. March lost $1.02 million compared to a loss of $666,000 a year earlier.

But sales rose two per cent to a record of $28.3 million in the quarter, compared to both a year earlier and the preceding quarter.

It got a push of $1.6 million from a foreign exchange gain. The sales beat analyst expectations by $2 million.

The stock rose eight cents to $2.11 following the release of results. It has dropped 79 per cent this year.

March said that there is no evidence that customers are cancelling or postponing plans for new surveillance equipment despite the global credit crisis which started in U.S. banks, a major customer.

It said that many of its financial services customers are outside the U.S., including new contracts in Mexico and another in Latin America worth more than $6 million.

In addition, it said that retailers are likely to keep buying the gear because hard times can lead to higher rates of theft and internal losses.

"All indications are that the security industry should be relatively strong," said CEO Peter Strom.

March reaffirmed earlier guidance for sales of $100 million to $115 million and operating earnings of $500,000 to $5 million in the fiscal year that ends next April.

That implies a sales gain of six per cent to 22 per cent and a significant improvement over operating losses of $7 million in the previous fiscal year.

The company said it generated operating earnings of $1 million, the first positive results in five quarters and an improvement compared to a loss of $1 million a year earlier.

March ran into trouble in the last two years as it struggled with falling sales from Wal-Mart, its biggest customer.

Wal-Mart is still the company's biggest customer, generating 11 per cent of sales in the quarter and 14 per cent in the first half. But that is a far cry from when the retail giant produced as much as 50 per cent in some quarters.

With Wal-Mart now using other suppliers, March predicts that the retailer will account for less than 10 per cent of revenues for the full year.

Excluding Wal-Mart and Cieffe, a recent European acquisition which generated $9 million in sales in six months, March said that revenues were 40 per cent higher in the second quarter compared to a year earlier.