Extended Systems Nosedives After Earnings Warning

Sales slumped largely due to poor demand in Europe.
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Updated from 3:35 p.m. EDT

Investors chopped off nearly half the market value of

Extended Systems

(XTND)

Friday after the company said late Thursday that it will report a wider loss than Wall Street had forecast, and expects things to get worse as the year rolls on.

For its fiscal fourth quarter ended June 30, it expects to report a net loss of between 9 cents and 11 cents a diluted share on revenue of about $13.2 million. Analysts surveyed by

First Call/Thomson Financial

had anticipated a loss of only 2 cents a share. Nevertheless, Extended, which makes products that manage networked computer printers, along with database software and infrared wireless connections for computers and peripherals, expects revenue from its mobile information management business to rise 75% from a year ago, to $5 million.

Extended closed down 37 1/16, or 43%, at 50 1/16. Extended is slated to release fiscal fourth-quarter earnings on July 31.

The company said sales in the second quarter slumped largely due to poor demand in Europe for its printer management software and Internet-related hardware.

But even more unnerving for investors was Extended's announcement that it had lost a large customer for its infrared wireless hardware because the customer is redesigning its product lines. Extended says the loss of the customer will lop about $1.1 million from its revenue from the most recent quarter.

The company also said it is shifting its focus to make software that helps run wireless handheld devices rather than infrared hardware for personal computers.

"While our financial performance in the fourth quarter was affected by European business conditions and our shift in product focus from hardware to software (for mobile devices), we believe we have strengthened our position in the wireless and mobile computing arena and are on track with our (mobile device) strategy," said Steve Simpson, chief executive and president of Extended Systems.

Simpson noted that the company has license agreements in place with

Intel

(INTC) - Get Report

,

Fujitsu

and

Motorola

(MOT)

for use of its technology in hand-held devices.

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