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ZAGG earnings commentary: Zagg Inc.'s (ZAGG) first-quarter profit decreased 83%, sharply missing analyst expectations, as the mobile-device accessory maker reported weaker margins and revenue.

Shares, which were halted ahead of the earnings release, tumbled 25% to $5.15 after hours as the company also lowered its full-year sales expectations. Through the close, the stock has fallen 47% over the past 12 months.

For the year, Zagg now sees sales of $274 million to $280 million, down from its prior view of $313 million to 318 million.

"This was a uniquely challenging quarter in which our results were impacted by a number of circumstances, some that were macro in nature and others that were company specific," said Chief Executive Randy Hales. "Though the company experienced reduced sales, ZAGG also realized benefits to its financial activities through the pay down of our line of credit and the repurchase of company stock."

ZAGG, has been diversifying its offerings from the screen protectors into areas such as keyboard cases for tablet computers, audio accessories and battery chargers.

The company noted Thursday that its results in the year-ago period benefited from product sales ahead of the launch of Apple Inc.'s (AAPL) iPad 3 in early April 2012, but there was no significant device launch in the latest quarter.

Additionally, Zagg said it ended its relationship with some of its distributors that it did not believe aligned with the company's channel pricing strategy during the quarter. While Zagg signed on new distributors, the revenue generated by these distributors combined with revenue from previous distributors missed its internal forecast. Zagg added it lost revenue opportunities as its invisibleSHIELD EXTREME and ZAGGkeys MINI 9 offerings were not well received by customers and as it consolidated its operations and sale force during the period.

Overall, Zagg reported a profit of $876,000, or three cents a share, down from $5.1 million, or 16 cents a share, a year earlier. Revenue fell 7.2% to $51.5 million.

Analysts polled by Thomson Reuters most recently projected earnings of 21 cents and revenue of $66.5 million.

Gross margin narrowed to 36.9% from 48.5%. The company noted gross margins were hurt by the continued shift in product mix as sales of invisibleSHIELD products, its highest margin product category, decreased as a percentage of total sales compared to a year earlier.




-Write to Nathalie Tadena at [e-mail]


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(END) Dow Jones Newswires

May 02, 2013 17:21 ET (21:21 GMT)

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