- The Washington Times - Monday, May 7, 2007

Tessco Technologies Inc. is riding the market for cell phones and other wireless devices to steady growth in income.

The company last week reported a 38 percent jump in profits for its most recent fiscal year as it broadens its customer base beyond a few key contracts, such as Cingular.

The Hunt Valley, Md., company supplies wireless equipment and services to the telecommunications industry.

“Today, our products span all wireless technologies,” Robert Barnhill, Tessco’s chief executive officer, said during a conference call with industry analysts.

The company sells to about 8,600 government and private customers.

For the fiscal year ending April 1, Tessco’s fourth-quarter net income reached $1.6 million, or 28 cents a share, compared with $1.1 million, or 17 cents per share, during the same period in 2006.

The company reported revenue of $127 million in the first three months of 2007, compared with $96.6 million in the same period one year earlier.

Its stock, TESS on the NASDAQ exchange, closed at $28.32 yesterday, down 21 cents or just under 1 percent, compared with Friday’s closing price.

Stock-rating service TheStreet.com has given Tessco a “buy” rating since March 2005, citing “a steady pattern of [earnings per share] growth, good cash flow from operations, impressive stock performance and robust revenue growth. These strengths outweigh Tessco’s low profit margins.”

Tessco operates in three business segments, covering network infrastructure, mobile devices and maintenance equipment.

It sells base station antennas, transmission lines, broadband equipment and related hardware through its network infrastructure segment. Its mobile devices include cellular telephones, pagers, two-way radios and accessories. Tessco’s maintenance equipment is used to install, test and maintain wireless devices.

Industry analysts say the company’s best chances for success lie within its strategy to resell wireless products from China and the value-added services it can offer customers.

“On value-added sourcing, they can, for instance, put together kits for cell site construction or act as a trusted adviser in meeting their customers’ needs,” said William Benton, analyst for the financial firm William Blair & Co.

Introduction later this year of Apple’s multimedia IPhone offers Tessco additional opportunities.

The company also benefited from avoiding temptations to diversify beyond the wireless market, he said.

“Over several years and facing several challenges, we believe that the management team has performed well through refocusing the business on core commercial and government market opportunities,” Mr. Benton said.

Revenue from mobile devices was up 80 percent, while the maintenance-equipment revenue fell 24 percent in the most recent quarter, largely because of a decline in Tessco’s repair-components business with Nokia, a major telecommunications equipment supplier.

“Competition with other distributors” and slowing sales of wireless equipment is creating “headwinds” for the company, Mr. Benton said.

“We believe this could be due in part to consolidation and also to cyclicality in the wireless communications market,” he said.

He predicted Tessco’s revenue would continue to grow this year. The company, which was founded in 1982, operates with about 750 employees.

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