Digital Insight Delays Planned Public Stock Offering Media & Technology by Carlos Martinez Online banking software maker Digital Insight Corp. has pulled out of a proposed public stock offering, citing market conditions. On Feb. 25, the Calabasas-based firm announced that it would offer an additional 4 million shares of its common stock valued at the time at more than $100 million. The cash, the company said, would be used to acquire unspecified competitors to garner a larger market share in the online banking business. But the company’s stock suffered a sharp drop after it released its first-quarter results, showing better than expected numbers but warning that its second-quarter revenue would be lower than current consensus estimates. Digital Insight estimated revenues of between $32 million and $32.5 million for the second quarter, while consensus estimates ranged between $35 million and $37 million. The stock price dropped from $24.17 on April 25, when company figures were released, to $18.26 on April 26, when 3.7 million shares were traded. The stock closed at $16.20 on May 10. The stock drop likely contributed to the company’s decision to cancel the offering, said analyst Jeffery B. Baker of U.S. Bancorp Piper Jaffray. Digital Insight reported a $34.7 million loss on revenues of $30.1 million for the first quarter, compared to a $17.6 million loss on revenues of $20.4 million for the same quarter a year earlier. Baker said the company has been hurt by its rapid expansion, but has now embarked on a restructuring effort to streamline its operations following the acquisition of rival Virtual Financial Services Inc. and others. Company CEO John Dorman said last month that the restructuring will mean the addition of an unspecified number of new employees. Dorman said the company plans to eliminate redundant operations and business functions brought about by recent acquisitions. Cost savings will not materialize until the fourth quarter, he said. Already, the company says it will take a $2.5 million charge in restructuring costs for the quarter. The company, founded in 1996, has yet to post a profit. Planned Layoffs Studio City-based independent production company Carsey-Werner-Mandabach LLC said it will lay off about 35 of its 130-person staff over the next few weeks. According to a memo sent to staffers last week, company president Dirk van de Bunt and COO Bob Dubelko said the cuts would take place in the company’s production and distribution units. “We’ve come out with a number of cost-cutting measures this year. But it is clear that we have to go further,” the memo read. “We’re working with department heads to look at every process and function to see where we can lower costs and still maintain quality.” Neither van de Bunt nor Dubelko would comment, but a spokeswoman there confirmed the layoff plans. This comes as the production company that once had a slew of high-rated television shows in production all at once faces what could be a dismal year where its revenues are concerned. So far, the company’s “That 70s Show,” which airs on the Fox network, is its only series scheduled to return to the fall lineup. Two other programs, “That 80s Show” and “Grounded for Life,” both also airing on Fox, have not been renewed for another season. The company is developing a series pilot for ABC’s fall schedule. Carsey-Werner-Mandabach is known for producing “The Cosby Show,” “Roseanne,” “Third Rock From the Sun” and “A Different World.” Two Firms Get Defense Contracts Thousand Oaks-based Rockwell Scientific Co. and Litton Systems Inc.’s Guidance and Control Division in Woodland Hills have been awarded new defense contracts recently. Rockwell, a privately owned unit of Rockwell Automation Inc., received a $2.3 million contract from the U.S. Air Force to develop goggles that would protect aircrews from laser beams. Rockwell said lasers are used to affect the vision of aircrews during combat. The goggles, to be developed under the Aircrew Laser Eye Protection/Systems Development and Demonstration Program, will provide aircrews with protection against several kinds of laser devices meant to damage their eyes. Bill Gunning, executive director of Rockwell’s Optics Division, said the goggles will allow aircrews to see without distortion both day and night. Meanwhile, Litton’s Guidance and Control Division has received an $11.9 million contract from the U.S. Navy for aircraft navigation equipment. The equipment will be used on the Navy’s single-seat F/A-18 Hornet attack fighter; the E-2C Hawkeye, an aircraft carrier-based radar plane; and the AV-8B aircraft, better known as the Harrier which takes off and lands vertically. The contract includes about $2 million for work on aircraft belonging to the governments of Egypt and Japan. The work will be done in Salt Lake City and Woodland Hills, with completion scheduled for June 2004. Diodes Expects Growth in China Discrete semiconductor maker Diodes Inc. in Westlake Village expects to see its market share in China grow next year. Company CEO C.H. Chen said last week that the company hopes to ramp up operations in China where it opened a sales office in March and already operates two manufacturing plants. “We see the Asian market as bigger than the European Market or North America,” said Chen, who expects double-digit growth in that market during 2003. The Asian market accounted for 47 percent of the company’s sales during the quarter ending March 31, compared to 39 percent for the same period last year. Joe Blankenship, an analyst with the investment firm Peacock, Hislop, Staley & Given Inc., said the company is poised to take advantage of the fast-growing Asian market. With the completion of a state-of-the-art wafer manufacturing plant earlier this year in China, Diodes is ahead of most of its competitors, said Blankenship, who sees the company taking full advantage of the demand for low-cost semiconductors in China. Earlier this month, Diodes released its first-quarter numbers, showing its first profit in three quarters. Until last June, the company had experienced 45 consecutive profitable quarters, before posting losses during the third and fourth quarters last year. For the quarter ended March 31, the company reported $208,000 in net income on revenue of $26.9 million, compared to $521,000 in net income on revenue of $25.7 million during the same period last year. Business Journal reporter Carlos Martinez may be reached at (818) 676-1750 ext. 17 or by e-mail at [email protected].
