Zebra Technologies Corp., a Vernon Hills, Ill.-based provider of business printing and security solutions, reported a 7.4 percent drop in second-quarter earnings Wednesday. Shares of the company fell $3.76, or 9.3 percent, to $36.58 at the close of trading.

The company said earnings fell largely due to some late-quarter order deferrals from North America retailers and business timing issues in Europe.

Net income for the quarter ended June 30 fell to $25.6 million, or 37 cents per diluted share, from $27.7 million, or 39 cents per diluted share, a year ago. The results were below analysts’ expectations of 39 cents per share.

Management said the second quarter was “more a bump in the road… than a harbinger of what’s to come.”

Zebra’s operating expenses surged almost 27 percent to $65.4 million from $51.7 million in the second quarter of 2006. General and administrative expenses rose 32 percent due to additional personnel from recent acquisitions, WhereNet Corp. and Swecoin. Increased spending for information systems and engineering fees for new product development also added to expenses.
 
Sales rose 11.5 percent in the quarter to $208.9 million compared with $187.4 million in the year-ago period, as international sales rose to record highs and sales from acquisitions added to overall numbers.

Analysts are optimistic about Zebra’s long-term prospects despite the drop in profit and uncertainty surrounding who will succeed the retiring Edward Kaplan as CEO.

“We’ve seen this type of volatility before with Zebra,” said Rod Bare of Morningstar Inc. in Chicago. “We understand most of Zebra’s customers are large retailers with tight capital budgets who will continue to give the firm’s sales force heartburn, but who will also continue to buy the technology to remain competitive.”

International sales rose nearly 15 percent, with China growing 38.7 percent and Latin America more than 16 percent. Management said North America’s sales growth did not meet expectations but would have if not for the late-quarter order deferrals.

Zebra’s hardware unit accounts for more than three-quarters of its total sales. All business segments saw sales growth in the second quarter, with hardware growing 12.6 percent and the acquisition of WhereNet in January boosting sales in the service and software unit 54.2 percent.

The company forecasts third-quarter sales to range between $208 million and $220 million, the same estimate it gave for the second quarter. It expects earnings to range from 34 cents to 40 cents per diluted share. Analysts surveyed by Yahoo Finance are more optimistic, with an average earnings estimate of 43 cents per share.

For the first six months of the year, Zebra earned $52.3 million, or 75 cents per diluted share, compared with $53.8 million, or 76 cents per diluted share, a year ago. Sales rose nearly 15 percent to $417.5 million from $363.2 million in the first two quarters of 2006.