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Update: Rockwell Plummets 7% on Weak Near-Term Forecast

The company cited an unfavorable climate for its automation products

Updated from 1:39 p.m. EDT

Rockwell International

(ROK) - Get Rockwell Automation, Inc. Report

, a maker of electronic devices for industrial and aviation equipment, said Monday that it expected to miss earnings targets for this year as well as 2001, citing an unfavorable climate for its automation products.

Milwaukee-based Rockwell estimated that its 2000 profit would be about $3.35 a share, 11% higher than last year but well below analysts' forecast of $3.44 a share, according to

First Call/Thomson Financial

. Rockwell is set to announce its results in the first week of November.

Moreover, the company said it expected earnings of $3.10 to $3.20 a share in fiscal 2001, assuming the market conditions do not improve until the second half of the year. Joint ventures and acquisitions are expected to dilute profits by 20 cents a share and are included in the estimate, a range that falls short of Wall Street's prediction of $3.76 a share.

Disappointed by Rockwell's warning, investors bailed from the company Monday, sending its shares down $7.69, or 20%, to finish at $30.50. It hit a 52-week low of $30 earlier in the session.

Sales of automation products, which go to the automotive, oil and gas and paper industries, among other sectors, are expected to fall 5% in the quarter ending Sept. 30, compared with last year, according to the company.

The news is particularly painful for Rockwell, a company that derives about 60% of its revenue and operating profit from its automation business, said John Baliotti, an analyst at

UBS Warburg

, a firm that has done underwriting for Rockwell in the past.

Don H. Davis, Rockwell's chairman and chief executive, attributed the weaker-than-expected results in part to the automotive industry's deferral of some capital spending projects, which make up about one quarter of Rockwell's total automation sales.

"I've got to tell you, I've been around the automation business for many years, and I've never seen anything quite as precipitous as this slowdown," Davis said in a conference call with analysts Monday.

Davis, who in 1963 joined an automation unit later acquired by Rockwell, suggested that the problem was industrywide, adding that his company's market share has remained steady in spite of the spending delay by carmakers.

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"Parts shortages in electronic components and displays are also affecting our ability to make timely deliveries and are increasing our material costs," he said in a statement. At the same time, however, Davis expressed confidence that the market would recover and strong revenue growth would resume.

Rockwell is not alone.

Honeywell International

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, a competitor that makes automation and aerospace products, had warned in mid-June that it would not fulfill earnings expectations for its second quarter, news that sent its stock down 15% in one day. Honeywell's stock has lost about 25% of its value since June 16, when it sat at $48.50 a share. The stock was lately trading down 31 cents, or 1%, at $36.19.

"I think it's something they're all experiencing," Baliotti of UBS Warburg said. "I don't think it's just an excuse."

Despite the pessimistic outlook, the company emphasized that it is taking steps to improve its businesses. Davis, noting that he only became aware of the extent of the problem within the last week, said in a statement that the company would continue to invest in new product development and would complete the realignment of its automation unit, a plan introduced in July.

Rockwell, once dominant in the defense industry, sold its aerospace and defense units to


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in 1996. Continuing to reshape itself, Rockwell spun off its automotive unit as


(MRA:NYSE) and its semiconductor business as

Conexant Systems

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