Power-One Announces Fourth Quarter 2007 Results

February 11, 2008 by Jeff Shepard

Power-One, Inc. announced that net sales for the fourth fiscal quarter ended December 31, 2007 were $132.3 million, compared with $116.2 million for the fourth quarter of 2006. Net loss for the fourth quarter ended December 31, 2007 was $6.5 million, or $0.07 per share, compared with a net loss of $14.2 million, or $0.16 per share in the fourth quarter 2006.

For Fiscal 2007, sales increased by 51% to $511.6 million, while net loss was $36.4 million or $0.42 per share compared with sales of $338.0 million and net loss of $14.6 million or $0.17 per share for Fiscal 2006. Legal expenses for the patent lawsuit against Artesyn for the fourth quarter were $1.8 million, and are expected to be substantially reduced in Q1. The 51% year-over-year revenue growth was driven mainly from the late 2006 acquisition of Magnetek’s Power Electronics Group (PEG), in addition to growth in the renewable energy inverter market, and higher sales in certain traditional products. Fourth quarter bookings were $123 million compared with $118 million in the third quarter of 2007.

While the company was in range for its sales guidance, earnings per share were slightly lower. This was primarily due to a less than expected improvement in gross margin. Factory inefficiencies and logistics costs negatively affected gross profit and had an approximate $0.02 per share negative effect on earnings.

Bill Yeates, Chief Executive Officer, commented, "This has been a challenging quarter and year for Power-One, but we have been improving our sales each quarter of the year. While we achieved many of our targets for this last quarter, not everything went as well as planned. We have made significant progress throughout the year in a number of areas including reducing our SG&A and improving sales by over 50%, but made only modest improvements in gross margin. Although the company continued to make improvements in the materials’ costs of approximately 1.5% over the prior quarter, this was mostly offset by a negative effect in factory and logistics’ costs. As a result, the margin improvements were not as good as planned. The company’s highest priority is to improve our gross margin. We have now closed operations at our Dallas, Texas and Hungary facilities and made reductions in other high-cost locations. In order to further align its cost structure, the company will be shifting additional significant operations from higher-cost to lower-cost locations, and reducing SG&A. The company’s primary focus in regards to gross profit is to increase the utilization of our China factory to attain economies of scale and shorten our supply chain to reduce logistics’ costs."

Yeates concluded, "With the announced changes of last year beginning to take effect, along with a shift of more products to lower-cost areas, we will see improvements in our gross profit. When this is coupled with the sales opportunities that we have due to Power-One’s technology, product portfolio, and world-class customers, we believe that 2008 will be a year of growth and profitability for the company."