Harman Sets Up To Battle KKR

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Harman International (HAR) released fiscal 2008 guidance this AM.

It is no coincidence that the company issued them after Goldman Sachs (GS) and KKR walked on a deal to take the company private. That news hit late Friday.

Harman said it expects operating income and diluted EPS before merger related costs to equal or exceed last year’s record performance. In 2007, operating income was $397 million and diluted EPS were $4.14 adjusted for non-recurring restructuring charges, merger costs and tax items.

The company added "In light of increases in material costs and faster ramp-up of R&D resources to work on new business awards, equaling the record operating performance of fiscal 2007 is an achievement. The benefits of common platform synergy and scalability will be realized in fiscal 2009 and beyond. Those benefits will strengthen our operating profits."

Harman’s shares have dropped from almost $124 per share when the deal was announced to $85 last week when it became clear the deal was in trouble.

The market either does not like the guidance or assumes that it means a legal fight with KKR. The shares are off another nearly 8% to $78.43.

Douglas A. McIntyre