- The Washington Times - Tuesday, September 3, 2002

Shares of Harman International Industries Inc. have been buoyed in the past few weeks by a strong earnings report and projection of earnings for next year.
Analysts said Harman, a D.C. maker of high-end audio equipment, has weathered the economic downturn with ease. The company even benefited last week when the market rebounded to put the Dow Jones Industrial Average above 9,000 for the first time in six weeks, they said.
Shares of Harman closed Friday at $51.23. They rose $8.74, or 20.5 percent, in August.
Key to Harman's recent surge was its announcement of record earnings for the quarter ending June 30. The company earned $26.1 million (76 cents per share), compared with $19.4 million (58 cents) during the like quarter a year ago. Sales rose 12 percent, from $447.7 million to $501.4 million.
An additional boost for Harman's shares came after the company predicted $2.90 per share for 2003. That's up about 10 cents from a prediction made before the company announced that it would begin reporting stock options as an expense.
The news came at a good time for Harman. Investors had shied away from the company earlier this summer because of fears that consumers might not be attracted to its more expensive products.
"In that time period, the market was worried about consumer confidence," said Brett Hendrickson, an analyst with B. Riley and Company in Los Angeles. "Investors are worried about anything that requires discretionary spending."
In July, top electronics retailers such as Tweeter and Best Buy said profits were slumping in part because of lower sales of higher-end audio and video products. Analysts said Harman was relatively unaffected by those retailers' troubles.
"That would have been more of a worry if it was a bigger part of Harman's business," Mr. Hendrickson said.
Harman's core businesses come from auto manufacturers, who install Harman audio systems in their car models, and from computer manufacturers. Dell, Apple, Compaq, Sony and IBM offer Harman sound systems and digital processing devices with their computers.
Investors have remained loyal to Harman primarily because of its ability to forecast earnings accurately.
Much of its revenue comes from contracts with luxury automakers, who are locked in to using Harman products in their cars for several years. The company has contracts with many automakers, including Daimler-Chrysler, Toyota, BMW, Porsche, Peugeot, Renault and Mitsubishi.
"They are locked in," Mr. Hendrickson said. "If [automakers] wanted to get rid of Harman, in some cases, they couldn't."
The next step for Harman is to push for sales of "infotainment" systems in cars, which include everything from compact disc and DVD players to global positioning devices. Its market penetration in this area is unsurpassed, analysts said, and the systems are becoming increasingly popular among wealthier Americans.
Meanwhile, Harman is also trying to increase sales of its products in Europe, where more people drive Mercedes and BMW cars.

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