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Technology JNI sees silver lining in gloomy economy

Technology: Firm Is Moving to New Location Despite Slide in Stocks

Its stock has been battered along with practically every other high-tech company, but San Diego’s JNI Corp. isn’t acting like the end is near.

Despite the announcement last month it would not meet quarterly profit estimates, the supplier of components used to connect computer servers and storage networks gave an optimistic outlook for the rest of the year.

CEO Neal Waddington said while the firm won’t meet its original estimates for the first quarter, orders showed a significant uptick in the past month.

About half of the anticipated $20 million in revenues this quarter came in the last 4 1/2 weeks, Waddington said.

“Frankly, that’s a rate we expected for the entire quarter,” he said.

However, a downturn in the economy and a trend toward more cautious spending on computer products led the firm to restate its projected earnings March 28. JNI said its earnings will fall short of estimates, and hit 3 to 4 cents a share, instead of 13 to 14 cents per share analysts had predicted.

On the low side, JNI earnings will hit about $840,000 vs. $3.6 million. While revenues won’t reach estimates, they will still exceed the previous year’s first quarter of $18.5 million.

The decline was blamed mostly on a downturn in sales of Sun Microsystems Solaris server systems. JNI is a major supplier to Sun, but also sells to other OEMs and through distributors.

The news sent JNI Nasdaq traded stock sliding below $10, but by late last week it was rebounding above $6. Last November the stock was trading above $122.

Last year, JNI reported earnings of $14.3 million on revenues of $103.2 million, compared to net income of $2.8 million on revenues of $40.2 million.

Waddington told analysts the company was in solid financial shape and sitting on about $115 million in cash, which may be used to make acquisitions.

As testament to Waddington’s optimism, JNI was in the process of moving to a new, 85,000-square-foot building in the Torrey Hills area from smaller quarters in the University Towne Centre area. The company plans to take over a 70,000-square-foot building now under construction adjacent to the new one.

“As we approach the next stage in the company’s evolution, we will do so in a facility that offers state-of-the-art infrastructure that enables us to grow to the $500 million level,” Waddington said.

The new space should allow JNI to accommodate the current local staff of 170 employees. The two new buildings can handle about 600 employees. JNI has about 240 employees worldwide, including about 60 at two smaller facilities in Fremont and Lake Forest, and an office in Munich.

While the new building contains manufacturing and testing area, the company contracts for its manufacturing, including San Diego-based SMS Technologies Inc.

Elliot Shev, SMS senior vice president of sales and marketing, said JNI is a good customer, but wouldn’t reveal any numbers.

The contractor’s overall business, which includes work for Tyco Inc., grew by about 25 percent last year, and is expected to increase 40 percent this year, he said.

Employment at SMS is about 270, well above the number in the previous year, Shev said. However, contract manufacturing is cyclical and relies on a good number of part-time employees, he added.


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