Tyco Reverses Year-Earlier Loss on Electronics Demand

BOSTON – Tyco International Ltd. (TYC) reported a quarterly profit Monday, reversing a year-earlier loss, helped by strong demand for electronic parts.

Tyco shares rose 1 percent as Chief Executive Ed Breen said in a conference call the diversified manufacturing company would use increased cash flow to pay down debt and possibly boost its dividend in the half of its new fiscal year.

The stock climbed even though the company offered an earnings outlook that fell short of Wall Street expectations and it warned about slowing orders growth for electronics.

Breen, who took office after an accounting scandal rocked the company in 2002, has undertaken an aggressive restructuring plan by unloading assets and exiting businesses in an effort to streamline the conglomerate and pare Tyco's debt burden.

Tyco posted net profit of $454 million, or 22 cents per diluted share, for the fiscal fourth quarter ended Sept. 30, compared with a loss of $297 million, or 15 cents per share, a year earlier.

Excluding extraordinary items, earnings rose to 45 cents per share from 34 cents a year earlier. On that basis, analysts average forecast was 43 cents, according to Reuters Estimates.

Revenue rose 13 percent to $10.44 billion.

"This is another great quarter," said John Boland, principal at Maple Capital Management (search), which holds shares of Tyco. "It's good to see that this management team is very disciplined, not pursuing reckless growth, and looking to improve the quality of this company."

Tyco's electronics unit, the company's biggest business division, performed well in the fourth quarter. Profit at the unit more than quadrupled to $481 million and revenue grew 15 percent, helped by strong demand for components from automotive, industrial and consumer electronics markets.

In last year's fourth quarter, Tyco took a $1.2 billion charge for restructuring and divestitures of more than 50 businesses, including fiber-optic cable unit Tyco Global Network.

Tyco also said on Monday that it had agreed to sell Tyco Global Network (search) to Videsh Sanchar Nigam Ltd., a part of India's Tata group, for $130 million.

For the current quarter, Tyco targets electronics revenues from existing businesses to rise between 3-5 percent versus 5-7 percent for fiscal 2005 and 12 percent in the past quarter.

"Based on conversations with our major customers, we believe we are in the midst of an inventory adjustment and not a cyclical downturn," said David Fitzpatrick, Chief Financial Officer at Tyco, in a conference call.

Tyco forecast fiscal first-quarter earnings of 40 cents to 42 cents per share, excluding divestitures and early retirement of debt. Analysts' average estimate was 44 cents.

Company officials said accounting changes will force it to shift about 2 cents of earnings per share into the second quarter from the first quarter.

"The quarter doesn't worry us," said Tim Ghriskey, chief investment officer with Solaris Asset Management, which owns shares of Tyco. "We still think Tyco is a company in the midst of positive change."

For the current fiscal year, Tyco forecast earnings per share of between $1.88 and $1.98. Analysts' average estimate is $1.97, with forecasts from 15 analysts ranging from $1.87 to $2.05, according to Reuters Estimates.

Tyco shares were up 37 cents at $31.52 on the New York Stock Exchange (search).