From Bloomberg Professional Service: 

By Meera Bhatia
     April 8 (Bloomberg) -- Bang & Olufsen A/S, the Danish stereo
maker that has cut profit forecasts twice this year, reported a
78 percent drop in third-quarter earnings after spending on its
luxury consumer electronics weakened as economies slowed.
     Net income slid to 26.2 million kroner ($5.5 million), or
2.3 kroner per share, in the three months through February, from
118.2 million kroner, or 10.1 kroner, a year earlier, the
Struer, Denmark-based company said today in a statement. Sales
declined 15 percent to 1.04 billion kroner.
     Bang & Olufsen will seek to cut costs and may narrow its
product offer and spend less on marketing, Executive Vice
President Peter Thostrup said on a conference call. Inventory is
being pared and planned store openings may be reduced next year,
according to Thostrup, who took over the temporary running of
the company when Chief Executive Officer Torben Ballegaard
Soerensen was ousted in January.
     ``At the beginning of the fourth quarter, the sales situation
in the main business remains both challenging and difficult to
predict,'' Bang & Olufsen said today. ``All Western European
markets suffered declines in turnover in the third quarter.''
     Spending power is ebbing in Europe and the U.S. as growth
weakens, inflation rises and higher living costs sap incomes,
while sliding stock markets are weighing on consumer confidence.
That's cutting into purchases of higher-priced versions of goods
from clothes to vehicles at companies such as sports-car maker
Porsche SE, whose North American sales slid 24 percent in March.

                        Shares Gain
     Third-quarter sales missed the 1.12 billion-krone average
of four analysts' estimates. The company repeated its March 14
forecasts for annual sales of between 4.25 billion and 4.35
billion kroner and operating profit of 225 million to 275
million kroner.
     Bang & Olufsen rose 6.5 kroner, or 2.1 percent, to 322.5
kroner in Copenhagen. The stock has slid 33 percent in 2008, the
fourth-largest loss in the 21-company Bloomberg Europe Home
Furnishings Index, which has declined 16 percent.
     ``The market seems to be reacting to the fact that the
company is not downgrading forecasts again,'' Kenneth Winther,
an analyst at Capinordic Bank in Hellerup, Denmark, said by
telephone. ``There's very little news in the statement.''
     The electronics maker, whose BeoVision 7 40-inch television
with DVD player costs about $13,250, reduced its forecasts for the
second time last month after demand weakened in the U.S. and Bang
& Olufsen's main European markets. The first cut, in January, was
followed the next day by the ouster of Ballegaard Soerensen.

                          North America
     Third-quarter sales of goods carrying Bang & Olufsen's own
brand slid 14 percent. Revenue dropped 30 percent to 118 million
kroner on that basis in Denmark, fell 15 percent to 121 million
kroner in Germany, and declined 32 percent to 97 million kroner
in the U.K., the company's three biggest markets.
     ``This is not good news,'' Rune Moller, an analyst at Jyske
Bank in Silkeborg, Denmark, with an ``accumulate'' rating on the
stock, said of the lower sales. ``The reason for the drop is a
lack of product launches this and last year and the
macroeconomic development, which you can't change.''
     Branded sales declined 26 percent to 48 million kroner in
North America and were unchanged in local currencies, the company
said. Japanese revenue rose 36 percent to 15 million kroner.
     Sales were unchanged at the unit that installs Bang &
Olufsen audio and video gear in hotels run by chains including
InterContinental, Mandarin Oriental and Four Seasons. They more
than doubled at the automotive unit, which signed up sports-car
maker Aston Martin as a partner in December. The company opened
two new B1 stores carrying only its own goods in the quarter.

                      `Fluctuating Numbers'

     Bang & Olufsen's main markets remain ``challenging and
unpredictable,'' according to Thostrup, who the company said
last week will leave at the end of September. A new CEO will be
named this month, Bang & Olufsen has said.
     The company will ``readdress its cost base'' and is trying
to find a balance between trimming costs and protecting product
development, Thostrup said on the call.
     ``We've seen fluctuating numbers from week to week,'' the

executive said. ``Our European business remains difficult and
challenging to predict.''
     Third-quarter net income missed the 42.8 million-krone
average of four analysts' estimates compiled by Bloomberg.
     Development costs increased by 6 million kroner in the
quarter, while distribution and marketing expenses rose by about
3 million kroner, the company said. The gross margin was 46.4
percent compared with 46.7 percent in the year earlier period.

--Editor: Dan Weeks, Paul Jarvis.

To contact the reporter on this story:
Meera Bhatia in Oslo at +47-22-99-6195 or
mbhatia2@bloomberg.net.