Avid Tech Shares Sink on Weak Outlook

Shares of Avid Technology Inc. on Friday tumbled to their lowest level since 2003, after the maker of film and music editing equipment issued a disappointing forecast and said 2008 will be a "transition year."

The outlook led Kaufman Bros. analyst Barbara Coffey to downgrade the stock to "Sell" from "Hold."

"We do not doubt that 2008 will be a transition year, but 2007 and 2006 were as well and that is just too long to ask investors to be patient," she wrote in a note to clients.

After the closing bell Thursday, Avid reported a fourth-quarter profit of $3.9 million, or 9 cents per share, compared with a loss of $52.6 million, or $1.28 per share, in the same period a year earlier. Excluding special items, the company earned 42 cents per share, below the average analyst estimate of 51 cents per share according to a Thomson Financial survey.

"Though sales and cash flow were strong, we are disappointed with the lower-than-expected earnings performance and need to improve our profitability," said Gary Greenfield, chairman and chief executive, in a statement.

Revenue jumped 8 percent to $258.5 million from $239 million.

For 2008, Avid forecast adjusted earnings 30 percent to 40 percent below 2007 levels and revenue "somewhat flat" with last year's.

Given Avid's 2007 adjusted profit of $1.23 per share, the company's guidance implies 2008 adjusted income of about 74 cents to 86 cents per share. The company reported revenue of $929.6 million for 2007.

Analysts forecast 2008 profit of $1.52 per share on revenue of $975.1 million.

Coffey said she continues to believe that Avid will create "market-leading products" in the professional video and audio markets. She noted that the company has a loyal user base and its management is investing in long-term projects that will ultimately boost shareholder value.

"Uncertainty happens with every company at some point, but three years of challenging and uncertainty is too much risk with an uncertain reward," she wrote.

Avid's shares fell $7.18, or 27.7 percent, to $18.74 in morning trading. Earlier, the stock hit $18.36, its lowest level since 2003.