Three-Five Systems, the Tempe-based producer of liquid crystal display modules for cell telephones and other products, suffered its seventh consecutive quarterly loss during the last three months of 2002.
But on Wednesday the company gave a relatively upbeat forecast for the coming year, saying it expects a big increase in revenue because of new products and acquisitions made during the past year. The company announced that it lost $2.6 million, or 12 cents a share, in the fourth quarter, about even with a loss of $2.7 million, or 12 cents a share, in the same quarter a year ago. Revenue dropped 30 percent from a year ago to $22.2 million in the latest quarter. Three-Five has been hard hit by the slump in the cell phone industry and dependence on one major customer, Motorola, but the company is trying to diversify its products and customers.
The entire fourth-quarter net loss was suffered in the company's Microdisplay division, which is developing a technology called liquid crystal on silicon. The Integrated Systems and Displays division, which produces liquid-crystal displays, broke even, said president Jack Saltich.
The improved performance in the ISD division reflected reduced dependence on Motorola and two new acquisitions that contributed to revenue in the fourth quarter, he said. The company won eight display-module design contracts in the ISD division during the fourth quarter that will be incorporated into telecommunications, industrial, consumer and handset products, he said.
The Microdisplay division has developed new displays, including the Spitfire optical engine, that have received “many accolades,” at industry trade shows, Saltich said. “Several customers are currently evaluating the Spitfire for a variety of projection applications,” he said. Microdisplay revenue amounted to $645,000 in the fourth quarter. In the first quarter of this year, the company expects revenue to increase to $24 million to $26 million with no single customer accounting for more than 20 percent of revenue. But the net loss is expected to widen to 27 cents to 29 cents a share because of fixed costs at overseas factories where manufacturing volume is expected to decline.
Second-quarter revenue is expected to increase sequentially by 20 percent to 30 percent because of a strong backlog of orders from new customers for color displays. The company also predicted revenue for all of 2003 will be in the range of $140 million to $160 million compared with $88 million in 2002. The increase is expected to result from new products and companies acquired last year that will generate income this year. The company said the ISD division is expected to achieve profitability in the third quarter of this year and be profitable for the full year while the Microdisplay division will lose between 49 cents and 59 cents a share for the entire year.
Three-Five shares declined 5 cents, or 1.1 percent, to close at $4.40 Wednesday on the New York Stock Exchange.