Last year at this time, Unova Inc. was flying high. The manufacturer of machine tools and data-collection systems was on an acquisitions tear, picking up Milacron Inc.’s tool division for $178 million, as well as R & B; Machine Tool Co. and the radio frequency identification unit of Dallas-based Amtech Corp. Those acquisitions helped Unova, which moved its headquarters from Beverly Hills to Woodland Hills in May, to post net income in 1998 of $69.7 million ($1.27 diluted earnings per share) a turnaround from a net loss of $171.4 million ($3.17) in the previous year. Revenues rose to $1.7 billion from $1.4 billion. Then trouble struck. In combining two recently purchased companies (Norand Corp. and United Barcode Industries) with Intermec Technologies Corp. (its Everett, Wash.-based division that makes bar-code readers and other portable data-collection devices), Unova ran into serious snags. “It turns out that the database that existed at Norand for the manufacture of these products was contaminated it was a bad database,” said Alton J. Brann, Unova’s chairman and chief executive. “If you were to order using that database, which we did, you would get wrong parts in some cases.” To correct the problem, workers at the Everett plant had to manually enter most orders, and temporary workers had to be hired to handle the extra workload. That cut into the company’s profit margins. For the second quarter ended June 30, Unova posted net income of $3.4 million (6 cents), compared with $9.2 million (17 cents) for the like year-earlier period. That followed a similarly disappointing first quarter, during which Intermec’s troubles started hurting the bottom line. For the first quarter ended March 31, the company posted net income of $3.5 million (6 cents), compared with $7.8 million (14 cents) in the like period a year ago. The consensus of analysts surveyed by First Call Corp. is that Unova will have earnings of 69 cents a share for the year a drop of 46 percent from last year. But they expect the company to rebound in 2000, and post earnings of $1.20. Contributing to the company’s problems though to a smaller degree than the database failure were troubles in the company’s machine-tool division, which saw a drop in orders as a result of Asia’s economic problems. The biggest hit came right after Unova’s purchase of the Milacron unit. “The machine-tool market absolutely collapsed on everyone at once,” Brann said. With all of Unova’s troubles, its stock has been all over the map. After the company announced its strong 1998 results in late January, the share price jumped almost 15 percent, to $20. But when the troubles became apparent, its stock fell to a 52-week low of $11.88. It got a boost in late July after the financial Web site SmartMoney.com reported a spate of insider buying, including three purchases in May totaling 100,000 shares by Brann. (Last week, the stock was trading at $15.25.) “There’s money to be made here,” Brann said. “So we’re buying ourselves.” Some analysts share Brann’s optimism. Among five surveyed by First Call, three rate the stock a “buy” and two rate it a “hold.” “They’re probably hitting the bottom of what have been temporary problems,” said Alexander P. Paris, president of Chicago-based Barrington Research Associates Inc., which rates Unova a buy. “Their problems are behind them now not completely behind them, but most of their problems are passed.” “The problems Unova is facing are surmountable,” agreed Walter S. Liptak, vice president of Cleveland-based McDonald Investments Inc. “They’re mostly internal problems, not market-related problems. So I’d expect they’d get worked out over a long period of time.” Liptak said he is encouraged by the amount of insider buying in recent months. “I think management is committed to turning the company around and, as such, I think they’re willing to put their own money into the company,” he said.
