Intersil slides on sales warning

Intersil Holding Corp. (Nasdaq: ISIL) plunged 35 percent Thursday following a warning that revenue would be flat for its fourth and first quarters.

Shares in the provider of silicon technology for wireless access and communications chips were down 12.06 to 16.94.

Intersil said it expects to meet analysts' consensus estimates for fourth quarter adjusted earnings per share of 26 cents, but that revenues will be sequentially flat, or about 5-percent below consensus expectations.

Revenue for the March quarter is also expected to be sequentially flat as a result of continued softness in analog orders in the current quarter. In addition, Intersil's first quarter is seasonally slow.

The company said slowing sales of its analog products are to blame for slowing revenue, and that it expects the growth in its other businesses will remain on track during the quarter. It had mentioned in its third quarter conference call that bookings started to soften at the end of the quarter, as distributors adjusted their backlog to balance inventory levels.

The company said progress toward its 50-percent gross margin goal, which is ahead of expectations due to ongoing cost reductions and a shift towards wireless access, will keep profits on target.

Intersil added that it expects to resume sequential growth in the second quarter of 2001, and that overall 2001 revenue growth should be 30 percent over 2000 as it continues to shift product mix towards wireless access.

Analysts from two of the firms that underwrote Intersil's February IPO remained supportive.

Drew peck at SG Cowen Securities Inc. maintained a "strong buy" rating on the stock Thursday.

"The investment thesis for ISIL is unchanged - wireless networking is poised to explode in the near future as home and campus networking become pervasive," Peck said.

Credit Suisse First Boston analyst Tim Mahon also maintained a "strong buy" rating, and gave the company a target price 64 percent higher than the current price.

"Using a sum of the parts analysis, we discount the company's analog and discrete businesses and value its "best in class" wireless business on par with leading comm-IC suppliers, to arrive at an implied value of $48" Mahon said.

"However, we are concerned about the near-term effects of channel inventory and continuing weakness in the PC market, as well as more looming pre-announcements (which motivated our downgrade of Intersil on Nov. 29," the analyst cautioned.