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Chip maker gets graphic setback

Tseng Labs' stocks tumble 30 percent after saying it expects a "significant loss" in the fourth quarter.

Tseng Labs (TSNG) today saw its shares tumble 30 percent after the graphics chip maker said it expects a "significant loss" in the fourth quarter.

Tseng closed at 4, down 2 points from yesterday. During trading today, the stock dipped as low as 3-3/4 a share.

The company said it will take a one-time charge of $11 million to $14 million for the fourth quarter ending December 31 as its switches its technology development focus on its 3D Graphics Roadmap and away from its 2D products. After reviewing both markets and talking with customers, Tseng found there was limited potential for its high-end 2D graphics chips.

Combined with the 2D products' reduced sales and pressures on profit margins, the company expects to suffer increased operating losses for the next several quarters.

Tseng has rolled out a 3D graphics accelerator, ET6300, but doesn't expect significant sales from that product until the third quarter next year.

"By taking these steps, we can more aggressively pursue future opportunities in both 3D graphics and multimedia," said CEO Jack Gibbons in a statement. "Our strong financial position, with cash in excess of $21 million and no debt, will sustain and support our efforts to introduce innovative new products."

Tseng reported a loss of $463,000 in the third quarter compared with profits of $100,000 a year ago. Revenues rose to $12.4 million in the quarter, up from $8.9 million the year earlier.