Affymetrix’s profits plummet despite boost for service biz
The dramatic fall in profits is largely attributable to the $90m royalty payment Affymetrix received in Q1 of 2008, which made 2009 look bad in comparison despite combined revenues from the products and services businesses rising by seven per cent.
Kevin King, CEO of Affymetrix, said: “We’re excited about a number of new product introductions that will take place in 2009. Additionally, we are optimistic about the potential impact of increased NIH funding and government stimulus dollars that have been allocated for life science research.”
Affymetrix’s service business’ increased revenue is attributable to the four large genotyping projects the company undertook in the quarter, two of which are still ongoing.
In a conference call with investors John Batty, chief financial officer at Affymetrix,predicted that revenues from the service division will remain fairly flat in the next couple of quarters but admitted the sector is hard to predict.
Batty described its service sector as a “lumpy business” that can spike and trough because of its reliance on a number of large projects that typically span across financial quarters.
King reiterated this sentiment, saying that the “very, very long lead times for sample availability” in the service sector meant that there is low visibility beyond the next couple of quarters.
King went on to use an aviation metaphor to describe the situation, saying that samples “tend to get stacked up like planes at Newark…some planes get turned back to the runway and new planes come on”.
