MAY 2008 BEACONHarman Out of Harmony with Third Quarter Results
Revenues Sound Sweet, But Profits Hit A Sour Note
<May 6, 2008>Harman International Industries, Inc. announced results for the third quarter ending March 31, 2008. In a separate press release, Harman additionally announced several management changes.
For the third quarter, Harman’s revenues grew by 17% to $1.033 billion vs. $883 million last year - but, citing “unprecedented charges for warranty issues” the quarter resulted in an operating loss of $7 million vs. a profit of $102 million the previous year.
Harman blamed the loss on a warranty charge that the company just didn’t see coming. Apparently, as the result of separation with a component supplier, Harman switched to a new memory chip to be used with an existing software package. The company says that despite significant testing, they didn’t catch a progressive incompatibility that took time to develop.
In a further discussion of operations, Harman noted that their Automotive and Professional Divisions performed well. Consumer net sales were lower, however. Gross profit margin declined a significant 9.3 percent, which was the impact of the warranty charges.
Harman’s Consumer division reported a net sales decline of 11.5% (excluding impact of currency changes) from $118 million last year to $113 million this year. Blaming increased competition and general economic weakness, Harman says it will introduce a roster of innovative new products this year.
Company Chief Executive Officer Dinesh Paliwal, in commenting on the quarter said, “…I continue to believe our company has tremendous upside potential. We have the advanced technology and systems integration expertise required for long-term success…”