3D: 2ND-QUARTER EARNINGS TO DROP.

Byline: Evan Pondel Staff Writer

VALENCIA - 3D Systems Corp., whose machines transform computer data into three-dimensional objects, said Thursday that its second-quarter earnings will be lower than expected due to weaker demand for its higher-end products.

The Valencia-based company expects a second-quarter net loss of 3 cents to 5 cents a share, with revenues slightly above $25 million, said Brian Service, 3D Systems' president and chief executive officer, in a conference call.

At Thursday's close, 3D Systems had declined $2.75, or 16.8 percent, to $13.65.

Previously, analysts surveyed by First Call/Thomson Financial had forecast earnings of 19 cents.

But the company said sales of its stereolithography systems were hit hard during the quarter as other companies tightened their own resources.

``We feel the reason the orders didn't come in during the second quarter was because of the sluggish economic environment,'' said Jeff Krinks, a spokesman for the company.

In the first quarter, the company's revenue was $27.9 million, compared with revenue of $23 million for the same period in the previous year.

3D Systems' first quarter also saw net income of $1.4 million, or 11 cents a share, versus net income of $1.1 million, or 9 cents a share, for the same period a year ago.

``We do expect to continue profitability in the second half,'' Service said.

However, the company has other obstacles to contend with, as U.S. antitrust authorities filed a lawsuit to block its acquisition of DTM Corp.

If 3D Systems' DTM Corp. bid, valued at $45 million, is approved, it would increase the availability of its machines, Krinks said, but antitrust authorities are claiming the acquisition ``would stifle innovation and raise prices.''

Since the company announced its deal with DTM on April 3, the energy spent on the lawsuit has been another factor weighing on 3D Systems' quarterly results.

``Our ability to manage the economy was handicapped by the time and effort required to manage this diversion,'' Service said.

According to the U.S. Justice Department, the two companies offer highly specialized systems that compete directly against each other in developing prototyping systems and materials.

But Geoff Kreiger, DTM's chief financial officer, said though the two company's machines appear similar, they use different materials.

For instance, Austin, Texas-based DTM's machines utilize powdered materials such as nylon plastic to mold objects, while 3D Systems uses photosensitive liquids to shape its components.

The lawsuit prompted 3D Systems to extend its tender offer for DTM's stock to July 10, partly to pursue a possible settlement, Kreiger said.

Yet, 3D Systems said it could be several weeks before a settlement date comes into focus.

3D Systems' second-quarter results are due out July 18.