(AFFX) Affymetrix’s Second Quarter Preliminary Sales Miss

Genetic products maker Affymetrix Inc (AFFX) has announced disappointing preliminary sales for second-quarter fiscal 2011. The California-based company expects to post revenues in the band of $64-65 million for the quarter, which is below the current Street view of roughly $74 million.

Affymetrix’s shares tanked $1.55 (or 19.4%) to $6.45 in after-hours trading on July 6. The company is expected to report final results for the second quarter after the closing gong on July 27.

Affymetrix expects product sales for the quarter in the range of roughly $58-59 million, including consumable and instrument sales of approximately $55 million and $3.5 million, respectively. Service revenues are expected to be roughly $5 million while license and royalty revenues are expected inthe vicinity of $1 million.

The company noted that its second quarter results were impinged by a decline in sales to its academic customers across all markets, especially in North America. Consumable sales clipped 10% year over year in the quarter. Nevertheless, the company remains optimistic about generating cash flows of roughly $10 million in the second quarter along with net cash of more than $155 million.

Affymetrix is a leading provider of microarray-based products and services to the global research community. Along with Illumina Inc. (ILMN), it is one of the two major providers of microarray technologies primarily used in the field of genetic research.

Affymetrix is broadening its customer base through new product introductions and strategic alliances. The company continues to enjoy steady end-user demand for its arrays. Affymetrix is pursuing a number of strategies (including expansion into new markets) aimed at expanding its top line. The shift in focus to high-growth markets represents a positive step for future revenue growth.

However, Affymetrix is operating in an intensely competitive industry and faces risks associated with lower R&D spending by its customers, notably in Europe, due to a weak economy and government actions including budget cuts. We currently have a Neutral rating on the stock.

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