Tyco’s size shrouds M/A-Com’s land mobile radio financial results
M/A-Com, Lowell, Mass., makes land mobile radio equipment and systems, and it is a part of Tyco International, a diversified Pembroke, Bermuda-based conglomerate.
On Oct. 24, Tyco International announced a net loss of $9.1 billion on sales of $35.7 billion for the fiscal year ended Sept. 30. The company did not provide a breakdown of figures for M/A-Com, but Tyco International listed an “internal” profit of $1.5 billion on $10.5 billion in sales for Tyco Electronics, the Tyco International subsidiary of which M/A-Com is a part.
Including M/A-Com, Tyco Electronics has 54 divisions, subsidiaries and brands. M/A-Com itself breaks down into four business units: Integrated Semiconductors, Components, Aerospace & Defense and Wireless Systems.
At the time Tyco Electronics acquired land mobile radio manufacturer Com-Net Ericsson Critical Radio Systems in May 2001 and placed it with the M/A-Com Wireless Systems business unit, M/A-Com’s land mobile radio business was estimated to include $60 million in annual sales, with Com-Net at $300 million.
“The electronics business continued to be negatively impacted by further softening of demand in the telecommunications end markets the company serves,” a statement from Tyco International about the Tyco Electronics subsidiary’s financial results reads.
The sale of land mobile radio equipment and systems is estimated to form about 1 percent of Tyco International’s business.
In comparison, Motorola’s land mobile radio business is estimated to form 10 percent or more of its $27 billion in annual sales; and Kenwood’s land mobile radio business is estimated to form 10 percent to 15 percent of its $2.4 billion in annual sales.
Tyco International had been rocked by the departure earlier this year of its former chief executive, L. Dennis Kozlowski, who left ahead of charges of tax evasion. After an interim period, Tyco International hired away Motorola’s president, Edward Breen, to take the helm. The departure of other top Tyco International executives followed.
Since then, Kozlowski and Tyco International’s former finance chief, Mark Swartz, have been charged with stealing $170 million from the company and using fraudulent stock sales to obtain more than $430 million.
Tyco International has been auditing its business for evidence of fraud. David Boies, an attorney hired to oversee the audit, said during a conference call about the 2002 fiscal year financial results that although a forensic accounting investigation of Tyco International’s books was only 60 percent complete, the review was not expected to reveal massive fraud.
Boies statement was enough to send the price of Tyco International’s stock up by nearly 12 percent in spite of the 2002 financial loss. The price rose from its Oct. 23 closing price of $13.94 to close at $15.49 on the day that the financial results were announced. During the past year, the price of a Tyco International share has ranged from $6.98 to $60.09.
Investors shrugged off one more thing.
The price of a Tyco International share was largely unchanged on Oct 25 after a Wall Street Journal analysis of Tyco International’s financial results published the afternoon of the earnings statement found something that the company didn’t reveal in the text of its earnings release.
Buried in a table attached to the release was the mention that the company would restate its earnings for the first nine months of 2002 because it had booked about $135 million of income at its ADT security alarm business too soon, income that should be recognized in future quarters.
Earnings restatements can be a symptom of questionable accounting, but investors seemingly placed more faith in Boies’ opinion about the audit.
