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Brightpoint's Pro Forma EPS Casts a Shadow


The problem may be anchored in its Europe, Middle East, and Africa region.

After the close last night, Brightpoint (CELL) pre-announced that its pro forma EPS will be in the range of $0.13 to $0.18 versus Street consensus of $0.19. Management doesn't provide guidance on its conference calls but it's a good idea to let the world know when you're seeing a material negative develop. Not surprisingly, the stock was off about 8% in the aftermarket.

The company is a major supplier of distribution and logistics services to the cellular handset industry. Management confirmed that it expects to ship about 81 million to 83 million units for the year, which is down 5% from 2008 levels. That's actually better than the anticipated industry contraction of -7%, so overall demand wouldn't seem to be the issue.

In all likelihood, Brightpoint's problems are in its Europe, Middle East, and Africa (EMEA) region. As you can see in the graph below, the region represents the bulk of its revenue and average selling prices (ASPs) have been in free-fall for the last year.

The company has been having issues in EMEA for a while as it tries to match the size of its footprint to the opportunity. A number of changes were instituted in the last quarter and, in all likelihood, they have yet to have an impact.

If there continues to be a shift to lower-end units in the EMEA region, it's certainly not a plus for Nokia (NOK). But beyond that I don't think Brightpoint's announcement says anything new about the state of the cellular industry.
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