Chicago — Cobra Electronics reported a “disappointing” second quarter for the period ending June 30, citing a loss of $2.7 million, compared to a net income for last year’s quarter of $723,000.
The loss was due to a write down of inventory from its first generation of GPS products.
Separately, today, Cobra said its new NavOne 2500 portable navigation product due in September, will be one of the first portable GPS devices to offer Wi-Fi capability for faster wireless and data capability. That device is expected to be available at $499 with further product capabilities to be announced.
Jim Bazet, president/CEO, said although the quarter was disappointing, “We are comfortable that these losses do not reflect on our future prospects and we are confident in our ability to secure a meaningful share of the mobile navigation and recreational marine electronics markets…” Causing the write down was the rapid decline in retail prices on GPS which rendered Cobra’s earlier lineup obsolete, resulting in a charge of $4.6 million, it said. Absent these charges, Cobra would have reported a net income of $357,000 or $.05 per fully diluted share, it said.
Sales for the quarter, were up 17.6 percent to $39.6 million from $33.7 million in the second quarter last year.
Radar detectors showed a net sales growth of 25 percent compared to last year and mobile navigation sales actually doubled for the quarter. CB sales were also up over five percent. Two-way radio sales, however, declined by 10 percent due to production delays on lithium ion battery-powered models, said Cobra. The underlying causes of these delays have been resolved and the company should catch up with demand in a few weeks, said sales and marketing senior VP Tony Mirabelli.
Gross margins for the second quarter declined to 10.5 percent from 25.6 percent last year attributable mainly to the GPS write down.
Earlier this year, Cobra acquired “state-of-the-art” intellectual property that “will form the basis for our next GPS and mobile navigation products over the next several years,” said Bazet.
Cobra forecasts that net sales in 2006 will exceed those of 2005 driven by sales of the NavOne. Earnings, however, are expected to decline from last year, even absent the asset write downs of the second quarter, due to delays in the introduction of “certain higher margin products and substantial airfreight expenses” on the new two-way radios, Bazet said.
Although the third and fourth quarter may be profitable, the company does not expect, at this time, the full year to be profitable.