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What: Shares of audio-products maker Harman International (NYSE:HAR) were picking up static today, falling as much as 18% after missing earnings estimates and announcing job cuts.
So what: Harman, a heavy supplier to the auto industry, was another victim of the slowdown in Europe as adjusted earnings per share dropped to $0.59 a share, well below the $0.88 analysts expected. CEO Dinesh Paliwal said: "We expected European production to be lower, but the accelerated slowdown in the month of December really surprised us." As a solution, the parent of brands such as JBL said it would cut 500 jobs in high-cost countries such as Europe and North America, and move some of its manufacturing capacity to developing countries.
Now what: Harman also sharply cut back its 2013 EPS forecast to $2.70-$2.90 from $3.67-$3.92. As others in the industry have said, Harman expects a difficult first half of the year in Europe, but it expects conditions to begin improving in the second half of 2013. Several other industry peers have reported bad quarters, but the European market should eventually turn around. Harman appears to be taking savvy steps to improve profitability, and I'd expect the stock to bounce back later in the year if conditions in Europe improve.
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