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Cyberonics' Shares Hit Hard

The company's third-quarter loss is wider than expected.



shares were jolted after the company reported a wider-than-expected loss in its most recent quarter and offered disappointing near-term guidance.

Shares of Cyberonics sank $2.42, or 8.6%, to $25.81 Wednesday.

The Houston-based medical-device company reported a loss of $14.6 million, or 58 cents a share, far worse than analysts' expectations of a 35-cent loss. Cyberonics lost 3 cents a share a year earlier.

For its fiscal third quarter ended Jan. 27, net sales were $31.3 million, compared with the $36.9 million analysts surveyed by Thomson First Call expected. U.S. sales were $27.6 million, an increase of 20% from a year ago, and international sales of $3.7 million were up 15.1% from $3.2 million for the third quarter last year.

Cyberonics is known for selling a nerve-stimulation system, called VNS therapy, that is used to treat epilepsy and depression.

The company projected sales of $34 million for the fiscal fourth quarter, but said its top line should grow to $51 million by the fourth quarter of fiscal 2007. On average, analysts were looking for revenue of $44.5 million in the current fourth quarter.

Cyberonics also said it was "committed and confident" that it will return to quarterly profitability by the second quarter of fiscal 2007.

"To that end, we expect that quarterly operating expenses will continue to decline to reach a quarterly sales break-even point of less than $38 million by the first quarter of fiscal 2007," the company said.