Filtronic profits hurt by delay from customer

The firm, which was spun out of the University of Leeds in the 1970s, said it has suffered as mobile phone operators continue to delay spending on telecoms infrastructure.

Shares closed the day down 6.5 per cent, falling 2.25p to 32.25p.

The company now expects to make a small pre-tax loss this year, compared to analysts' previous hopes of 500,000 profit.

Chief executive Hemant Mardia said the delays relate to one particular customer, which analysts identified as Nokia Siemens, and the auction of third generation (3G) spectrum licences in India.

The auction to upgrade India's mobile phone network started recently after a delay of a year-and-a-half. However, this has caused a hiatus for Nokia, which hoped to supply winning operators and had stocked up on equipment.

"The big operators are sitting on their hands for this period, whilst the auctions go through," said Dr Mardia.

"It's going to take us until the beginning of next year when we expect things to start picking up for that customer. It's very frustrating because we were quite positive and encouraged."

Filtronic has downsized significantly in recent years, including selling most of its wireless infrastructure business to US firm Powerwave Technologies in 2006. It is focused on its point-to-point radio operations, which links mobile phone base stations.

Filtronic recently moved its headquarters from Shipley to Newton Aycliffe in County Durham. Yesterday the company revealed it has also moved remaining production from Shipley to Durham to cut costs, shedding 17 jobs.

"Unfortunately because of the volumes that we now have it did not make sense (to keep manufacturing in Shipley)," said Dr Mardia.

However, he said Filtronic will retain Shipley as a small research and development facility, where it is developing a Gigabit radio thanks to a 1.25m grant from Yorkshire Forward.

The technology, which Filtronic will spend two years developing, is designed to transmit five to 10 times more data than existing radios. It will be developed to launch into the market once fourth generation (4G) high-speed data is rolled out by mobile phone operators. The successor to 3G and 2G standards, it will allow mobile phone users to stream high-speed, high-data services on their mobile phones.

Despite the delay, the company is hopeful new orders will add "significantly" to revenues from the start of 2011.

Earlier this year it won a contract to supply modules to an unnamed original equipment manufacturer (OEM). It will kick in from June and is expected to be a five-to-seven year deal.

Filtronic is planning for the global rollout of the next generation of high-speed mobile networks, and believes demand will soar when this happens.

"The market out there is looking encouraging," said Dr Mardia. "There's a lot of demand for mobile broadband."

Analysts said while the profits warning is disappointing, the longer-term prospects for Filtronic are undimmed.

Leeds-based WH Ireland analyst Eric Burns said: "We continue to believe Filtronic is exceptionally well-placed as and when infrastructure markets recover."

Analyst Nick James, at house brokers Panmure Gordon, said: "Our investment case, which was always longer-term in nature, is intact. We believe the business will continue to broaden and move towards an attractive financial profile."

Lining up for India 3g auction

India has launched its much-delayed auction of third-generation (3G) licences, as it seeks to upgrade its mobile phone network.

Nine telecoms firms are bidding for three pan-India licences that cover 22 regions. 3G allows simultaneous use of speech and data services and higher data rates.

Analysts believe winning bids for the 20-year 3G licences for national cover could touch $2bn.

China, the world's biggest telecoms market, awarded 3G licences to the country's top-three phone operators in 2009. The UK raised more than $35bn from a spectrum auction in 2000, while the US government got $19bn by selling spectrum in 2008.