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Downgrades sting NeoMagic shares

Shares of NeoMagic Corp. (Nasdaq: NMGC) plunged 1 1/2, or 13 percent, to a 52-week low of 9 5/8 Tuesday after Morgan Stanley Dean Witter and Preferred Capital Markets downgraded the chipmaker.

Morgan Stanley Dean Witter cut the stock from an "outperform" rating to "neutral" while Preferred Capital Markets slashed it to a "buy" recommendation from "strong buy."

In a research report, Preferred Capital Markets analyst Brian Alger said the downgrade was based upon "constraints from key foundry suppliers."

First Call consensus expects NeoMagic to earn 34 cents a share in its first quarter.

Last quarter, it earned $8.9 million, or 34 cents a share, on sales of $71.9 million. In fiscal 1998, it pocketed $31 million, or $1.19 a share, on sales of $240 million.

NeoMagic shares fell to a previous 52-week low of 9 11/16 in April after trading at 23 and changed in December.

NeoMagic provides multimedia accelerator chips to notebook PC manufacturers.