NextLevel Systems Inc., anticipating it will fail to meet revenue and profit expectations through next year, said Thursday it accepted the resignation of its chairman and chief executive officer, Richard S. Friedland.
The announcement sent shares in the Chicago-based supplier of cable, satellite and telephone system equipment plummeting $5.44, or more than 28 percent, to $13.44, in New York Stock Exchange composite trading Thursday. The 46-year-old Friedland was named the company’s chairman and CEO in July when NextLevel was spun off from General Instrument Corp.
Friedland joined General Instrument in 1978 after a stint with Price Waterhouse and held a series of financial positions before moving up to vice president of finance and controller in 1990. He was promoted to chief financial officer in 1992 and president and chief operating officer in 1993 before assuming the roles of chairman and chief executive in December 1995.
In the early 1990s, Friedland was instrumental in creating an alliance of consumer electronics and technology companies that developed industrywide standards for high-definition television.
Friedland declined to comment on Thursday’s action.
At the time of the spinoff in July, Friedland told the Tribune in an interview that NextLevel was poised to see its annual earnings grow more than 20 percent as a result of the company’s transition to wider deployment of its digital systems and cheaper and more efficient manufacturing as production volume increased.
Now that seems to have been overly optimistic.
For the third quarter, ended Sept. 30, NextLevel said it expects earnings per share to “approximate” analysts’ expectations of 15 cents a share, but with lower-than-anticipated operating income and revenues. In the year-earlier period, the company reported profits of $19 million, or 13 cents a share, on revenues of $429 million. Third-quarter earnings are due to be reported Tuesday.
NextLevel expects to report fourth-quarter earnings of between 9 and 11 cents per share, before any one-time restructuring charges, while Wall Street was expecting profits of 21 cents per share. The company said it won’t meet analysts’ expectations of 54 cents a share for 1997.
For 1998, the company expects to have earnings in the range of 45 to 50 cents a share before any anticipated benefit of corrective actions, falling well short of analysts’ estimates of 75 cents per share.
NextLevel named Edward D. Breen as acting chief executive. Breen, 41, was president of NextLevel’s broadbrand networks group, which accounts for about 70 percent of the company’s revenues and $200 million of its operating income.
NextLevel’s board isn’t currently searching to find a permanent chief executive and may stick with Breen for a while, a company spokeswoman said.
In hopes that it can improve financial performance, NextLevel said it adopted a restructuring plan that it would announce in detail within 60 days. The plan is expected to include exploring alternatives for its advanced telephony products unit, Next Level Communications.
Options include a sale or spinoff, with NextLevel Systems retaining partial ownership, the company spokeswoman said. The Rohnert Park, Calif.-based unit, which lends its name to the parent company and was acquired in 1995 for $85 million, will have operating losses of more than $50 million this year.
NextLevel also plans to cut costs at its Satellite Data Network unit and find ways to take advantage of its strategic alliances and relationships with customers.
While the satellite group is expected to generate more than $500 million of revenue this year, it will end up with a small operating loss, the company said.
Lazard Freres & Co. LLC is advising the company in its retooling process.
