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Salt Lake hearing-aid maker suffers 38% stock drop

SHARE Salt Lake hearing-aid maker suffers 38% stock drop

Shares of Salt Lake-based Sonic Innovations Inc., a maker of digital hearing aids, plunged 38 percent Tuesday after the company forecast revenue growth may dip below 13 percent for the first time in two years because of slowing sales in Germany.

Second-quarter profit will be 2 cents to 4 cents a share on revenue of $24 million to $25 million, Sonic said in a statement late Monday. Net income was 1 cent and sales were $21.9 million in the year-earlier period.

Germany this year started a 10 Euro ($12.14) co-payment by patients for specialist doctor visits, including physicians who fit hearing aids, and cut reimbursements for the devices, Sonic said. German sales became a bigger portion of revenue after Sonic purchased a German hearing-aid retailer in May 2003.

"The institution of a co-pay for the very first time is keeping patients away from specialists," Sonic chief executive officer Andy Raguskus said in an interview. "It's not just a hearing-industry problem."

Shares of Sonic slid $3.51 to close at $5.66 Tuesday in Nasdaq Stock Market composite trading. It was the biggest one-day drop and highest trading volume since the company first sold shares to the public in May 2000. About 5.9 million shares traded.

The stock had risen 42 percent this year as investors bet on accelerating sales. Revenue growth jumped to 55 percent in the first quarter from 49 percent in the fourth quarter as European sales almost tripled.

Sales in Germany this quarter will be about $2 million less than in the first quarter, mostly because of the new co-payment, Raguskus said. Sales growth the rest of this year will remain slower than the pace in the first quarter, Sonic said in the statement. Sonic will update its 2004 forecasts when it reports second-quarter profit and sales on July 27, Raguskus said.

"With the primary catalyst (growth of the German business) behind the stock faltering, we are moving to the sidelines," Mark Mullikin, an analyst at Piper Jaffray & Co., wrote in a note to investors. He cut his rating to "market perform" from "outperform."

The company makes aids and components under the brand names Natura, Altair, Tribute and Quartet with DSP computer chips that process sounds. Sonic competes with larger companies including Siemens AG, Starkey Laboratories Inc., Widex A/S, William Demant Holding A/S, Phonak Holding AG and GN Store Nord A/S.

The company estimates that only a fifth of the 10 percent of the population that has hearing loss owns a hearing aid, citing industry research.