CIBC World Downgrades Zoran to Sector Perform

Analyst Rick Schafer says the company's new third-quarter guidance is well below his forecasts

Zoran (ZRAN ) cut its third-quarter outlook. CIBC World downgraded the stock to sector perform from sector outperform.

Analyst Rick Schafer says the company's new third-quarter guidance of 13 cents to 19 cents earnings per share on $115 million to $119 million in revenue is well below his 29 cents EPS and $130 million revenue estimates. He notes the company tied the weakness to DVD player sales to China, which accounts for 40% of Zoran's sales.

Schafer says poor near-term visibility remains his primary concern. He notes China's Lunar New Year typically supports otherwise flagging fourth-quarter sales, accounting for 50%-plus of fourth-quarter sales. He says the outlook there is uncertain at best.

He cut his EPS estimates from 76 cents for 2004 to 45 cents, and from $1.21 for 2005 to 66 cents. He awaits improved visibility. He removed his $20 price target on the stock.