Shares of the Mountain View, Calif.-based company rose $8.13, or about 13 percent, to $69.63 in trading today. Yesterday, the stock fell $9.75 to $61.50 on volume of 2.1 million shares, more than five times the stock's average volume during the past three months.
MIPS produces chips and software for robotic toys, TV set-top boxes and handheld PCs. It also makes network and Internet equipment.
In a report released today, Doug Van Dorsten, an analyst at Thomas Weisel Partners, cut his rating on the stock from "strong buy" to "buy." He reduced revenue estimates for the current quarter to $27.6 million from $30.4 million.
Van Dorsten also cut his per-share earnings estimate to 25 cents from 29 cents for the quarter.
"We like the story a lot, but revenue from Nintendo is falling faster than anticipated," said Van Dorsten.
More than 50 percent of MIPS's revenue is derived from Nintendo, a leading maker of video-game consoles.
Sony's PlayStation 2, which contains MIPS chips, were released in Japan last weekend. The console will reach the U.S. market later this year.
Sales are expected to be strong, which should help MIPS make up some of the revenue shortfall from Nintendo, Van Dorsten said. But revenues from Sony will not show up until the September quarter, which is the first quarter of fiscal year 2001 for MIPS.
Van Dorsten left his 2001 estimates unchanged, but he believes the Nintendo revenue problems will have a short-term effect on the company's bottom line.
"I expect the stock to go back up once the Sony PlayStation deal ramps up," said Arnab Chanda, an analyst with Robertson Stephens. "The company's revenue mix is also changing as they expand their business into DSL (digital subscriber line), wireless products, networks and digital TV."
"We continue to view the strong growth outside of Nintendo...as extremely attractive," Van Dorsten said in his report. He noted that analysts may revise their short-term forecasts. "We believe the consensus EPS estimates for the next several quarters are likely to move modestly lower from current levels."
Analysts surveyed by First Call expect the company to earn 28 cents a share for the quarter.
Silicon Graphics spun off MIPS in June 1998 and owns 66 percent stake in the company.