Mentor Graphics falls on hard times

Shares of Mentor Graphics Corp. (Nasdaq: MENT) plunged 15/16, or 10 percent, to 8 7/16 Wednesday, one day after the software developer reported disappointing sales and earnings in its second quarter.

On Wednesday, Merrill Lynch, CS First Boston and Thomas Weisel all downgraded the stock.

In the quarter, Mentor Graphics reported a profit of 9 cents a share, excluding one-time charges, on sales of $119.5 million.

The $119.5 million in sales was essentially flat versus the year-ago quarter when it earned $804,000, or 1 cent a share, on sales of $119.1 million.

Including the charges, Mentor actually lost $317,000 in its second quarter.

First Call consensus originally pegged the company for a profit of 14 cents a share but moved its estimate lower after Mentor issued a profit warning a couple of weeks ago.

"While disappointed in our revenue, we saw continued strength in our newer product lines, and remain bullish on the business," said CFO Gregory Hinckley in a prepared release.

CS First Boston cut the stock from a "buy" recommendation to a "hold" and set a 12-month price target of only $9 a share. Thomas Weisel downgraded it from a "buy" to "market performer" and Merrill Lynch cut it from a near-term "attractive" rating to near-term "neutral."

Mentor shares moved up to a 52-week high of 15 1/16 in April after falling to a low of 5 7/16 in October.

Seven of the 13 analysts following the stock maintain a "hold" recommendation.

First Call consensus is looking for a profit of 11 cents a share in the third quarter and 58 cents a share for the fiscal year.>