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C-Cube stock takes a plunge

The digital video maker's stock plummets after company warns of disappointing earnings.

Shares of C-Cube (CUBE) plunged as low as 24 percent today, after the company said its second-quarter earnings and revenues will fall short of Wall Street expectations.

C-Cube, one of the most actively traded issues on Nasdaq, traded as low as 19-3/8, down from its close of 25-1/2 yesterday.

The digital video silicon solutions developer said today it expects its earnings for the quarter ending June 30 to range between 20 to 25 cents a share. Analysts had expected the company to report earnings of 40 cents a share, according to First Call.

Revenues are expected to reach between $70 million to $75 million for the quarter.

In the previous quarter, the company posted revenues of $94 million and earnings of 41 cents a share. But that quarter marked the first time in more than seven consecutive quarters that the company's revenues did not grow sequentially.

The company also pointed to price cuts--part of an effort to remain competitive--as another contributor to its sluggish performance.

C-Cube cited slow sales of its MPEG1 decoders, which are used in Video CD players, as the main reason for the lower-than-anticipated earnings. The MPEG1 decoders are sold primarily in China.

Until DVDs become a mass market phenomenon, a large part of C-Cube's fortunes rest in the Asian Video CD markets.

"Video CDs are a significant market for their MPEG-1 chips. Probably 80 percent go to China, and the rest are in other Asian markets," said Terrrence McCrary, vice president of research at Stamford, Connecticut-based financial analyst company Auerbach, Pollak & Richardson. "But DVD is their growth product."

Companies that design inexpensive Video CD players say they have had problems incorporating C-Cube's new lower-priced decoders into their products.