Shares of American Power Conversion Corp. of West Kingston plummeted as much as 20 percent after the company said it plans to invest more in making devices that protect a business’s computer network against electrical surges.
The plan may curb 2004 earnings growth. American Power intends to boost its large-systems business, which includes power units for data centers, by increasing investments in sales and marketing and maintaining competitive prices, Chief Executive Rodger Dowdell Jr. said in reports.
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“Investment in the business means more expenses,” Rose Papp, who helps manage $600 million at L. Roy Papp & Associates in Phoenix, said in an interview. The Papp funds hold about 400,000 shares of American Power, she said.
Shares of American Power fell $3.31, or 13 percent, to $23.07 and traded as low as $21.15 as of 3:13 p.m. New York time in Nasdaq Stock Market composite trading. The Rhode Island-based company’s stock had gained 77 percent in the last year.
Investors are also concerned gross margins will fall because the large-systems business provides lower margins than other units, and “competitive” prices means the company will take in less, Papp said.
American Power said in a statement that first-quarter orders will increase from a year earlier by a “high single digit” rate. That’s “not enough to offset these other expense issues,” said Papp in reports.
Still, planning for growth and for a “nice, gradual recovery in capital spending by corporations is a good thing,” Papp said. “We will have a several year recovery in technology spending.”
Profit was already expected to fall short as compared with 2003 when sales were boosted by concerns sparked by the biggest blackout in North American history, Craig Irwin, a First Albany Capital Analyst, said in a report.
Bloomberg News
