Shares of Smith & Wesson (NASDAQ:SWHC) soared more than 10% Friday morning after the firearm company disclosed plans to unload its perimeter security unit and focus on its core business.
The Springfield, Mass.-based company said late Thursday it is currently exploring strategic options that will enable it to divest its perimeter security business. Smith & Wesson cited weaker demand in the security arena since it acquired the Nashville-based business Universal Safety Response.
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It’s not clear exactly how it will shed the unit, which has since been renamed Smith & Wesson Security Solutions, but options could include an outright sale or spinoff.
“Smith & Wesson Security Solutions has developed a track record of customer support and system expertise across a diverse corporate and government customer base,” CEO James Debney said in a statement. “We believe its strengths could be better maximized as an independent company, or as part of a group of companies, focused entirely on the security solutions market."
Shareholders cheered the move, bidding Smith & Wesson 11.45% higher to $2.93 Friday morning. The company's shares had sunk 6% over the previous four weeks and 30% year-to-date.
Smith & Wesson said it plans to report the unit’s results as discontinued operations beginning in the second quarter of fiscal 2012 and restate prior results to reflect the change.
The company said it plans to zero in on its core firearm business, which accounted for 92.5% of its revenue in its fiscal first quarter. Firearm revenue jumped 18% last quarter.
"The decision to divest the security solutions division and focus our financial, managerial, and operational resources toward expanding our presence across our firearm market channels is intended to support our long-term growth opportunities and enhance stockholder value." Debney said.