Maritime communications equipment maker EuroCom Industries (ECI) downgraded its 1999 sales and earnings forecast last week, citing slow demand for a key product after U.S. global satellite telephone firm Iridium filed for bankruptcy protection. Issuing its second profit warning within as many months, Danish-based ECI cut its full-year turnover estimate to 580-600 million crowns ($83-85.5 million) from 630-650 million crowns. It now saw break-even on the bottom line, down from a 20-25 million crown profit forecast. By comparison, in January-June, ECI's pre-tax profit more than doubled to 47.7 million crowns.
The major problem is that one of ECI's main products is that sales of a terminal designed to transmit and receive signals via global satellite telephone company Iridium's system of 66 satellites in orbit around the earth have been hit.
"Sales of the Iridium satellite terminal
developed by ECI were adversely impacted by the fact that the company behind Iridium filed for protection from its creditors," ECI said in a statement. "We believe that a financial restructuring of Iridium is likely, so as to allow continued operation of the 66 satellites," ECI said, adding: "a breakthrough in sales is not expected until Iridium's financial situation has been clarified."
U.S. Motorola owns 18 percent of Iridium.
ECI's share price has halved since Iridium's mid-August Chapter 11 bankruptcy protection filing.
A European Union directive obliging all fishing vessels of a certain length to be equipped with a global distress and safety communications system (GMDSS) would take force next year, boosting sales, ECI said, noting it was a leading supplier of GMDSS equipment.