UBS Warburg rated


(Nasdaq:AUDC) a Buy, but lowered their profit forecasts for 2001 and 2002 in a recent report.

The report spurred investors to send the stock down 24% as Nasdaq opened on Thursday. Moreover, turnover was remarkably high, 2.9 million shares compared with an average volume in the ten preceding days of 659,000 shares. In the last 52 weeks, AudioCodes shares have tumbled 80%.

UBS Warburg analysts Jonathan Half and Nikos Theodosopoulos say that January and February were weak months for AudioCodes, in terms of order backlog. Beyond that the analysts add they do not believe AudioCodes will remain immune to the problems of the communication equipment industry.

UBS rejects company's forecast

UBS lowered its 2001 profit forecast from 71 cents per share to 60 cents, and the 2002 profit forecast from 90 cents per share to 77 cents.

The analysts maintained their Buy recommendation for the share but cut the price target to $23 from the previously forecast $27.

AudioCodes lowered its sales forecast for 2001 by 10% when posting its Q4 results for 2000. Most investment banks seemed to adopt the numbers as they were issued by the company. But UBS is rebelling. Half and Theodosopoulos believe revenues will be lowered by 15%.

The analysts believe sales to small companies and startups will suffer badly, although sales to major corporations such as

Cisco Systems

(Nasdaq:CSCO) and


(Nasdaq:CLRN) should not. Most of Clarent's sales are to Asia, where the blow is expected to be lesser than in the U.S. The drop in Cisco's sales has already taken effect in the previous quarters.

UBS was the first to lower its forecast for 2001, beating all other investment banks covering the AudioCodes share, as well as the company itself.

AudioCodes objects

Mike Lilo, Vice President of Finance and Chief Financial Officer for AudioCodes, claims that the price forecast was, as it still is, inaccurate and premature.

Lilo adds that nothing that justifies lowering the sales forecast has happened. "As early as the beginning of the year we announced the year would be harder due to the deceleration in the market. We have updated our forecasts accordingly by 10%. At this stage all the signs pointing at us ending the first quarter just as planned. It may be a hard task, but at the moment there is no cause for concern," he said.

Lilo added the share already incorporates the market's situation. UBS does not expect AudioCodes' management to update its forecasts before the end of the quarter.