Microsemi Shares Shrink on Shortfall News

The chip maker's warning of sluggish fourth quarter revenue growth prompted one Wall Street firm to slash its target price

Microsemi (MSCC) shares tumbled more than 11% early Monday, after the computer chip maker warned of a shortfall in a weak market.

"Order rates have been generally strong, but turns business expected in the quarter have not materialized to original forecast," the Irvine, Calif.-based company said in a press release late Friday. It noted weakness in the overall market.

Microsemi expects fourth quarter revenues for fiscal 2006 to be flat to up 2 percent, compared to revenues of the third quarter of fiscal 2006 and non-GAAP earnings to be $0.25 to $0.27 per share, excluding one-time charges. The company did not provide any clearer comparison in a press release.

Microsemi's stock price fell 11.2% to $22.77 per share in early Nasdaq trading Monday.

Analysts slashed their estimates to account for the new guidance. Needham & Co., for example, slashed its rating on the stock to buy from strong buy, citing the recent news. Analyst Quinn Bolton had estimated 7.8% fourth quarter revenue growth and earnings per share (EPS) of $0.30.

Microsemi operates in markets that range from integrated circuit solutions to monitors. The analyst thinks Microsemi's business operations least likely affected by the market slowdown include those in products related to notebook computers, satellite and Liquid Crystal Display television. The most challenging markets include medical and Wireless Local Area Network products. Bolton slashed Needham's 12-month stock price target for Microsemi to $25 from $32 per share.

Microsemi will announce its final fourth quarter financial and operating results on November 16, 2006. A Microsemi spokesman did not respond within press time to a voicemail requesting an interview.

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