Sawtek slumps on warning

Sawtek shares fell more than 10 percent Tuesday after it lowered earnings and revenue targets for its second quarter. Analysts cut estimates but maintained their respective ratings.

Shares of the company dropped $1.81 to $15.25 at the opening bell on Tuesday. Sawtek (Nasdaq: SAWS) develops signal-processing components that are used in wireless networking equipment, cable television systems, cellular telephones, and satellite systems.

After Monday's closing bell, the Orlando, Fla.-based company warned that second-quarter earnings and revenue will miss estimates, due to a slowdown in the wireless communications sector and lower-than-expected orders.

For the quarter, the company now expects profits to come in between 22 cents and 24 cents a share, short of First Call's estimate of 29 cents a share. Revenue is projected in the $29 million to $31 million range.

Company officials also said visibility for the rest of the year was unclear, but expected revenues and profits for the year to fall short of previous estimates.

Analysts predictably lowered their estimates but maintained their ratings, despite few prospects for growth.

At CIBC Oppenheimer, analyst Dale R. Pfau cut fiscal 2001 earnings for the company. Fiscal 2002 numbers were maintained, pending additional information from the company's conference call, scheduled for this morning. The analyst also reiterated a "buy" rating on the stock.

Edward F. Snyder at J.P. Morgan maintained a "market performer" rating on the stock, although the analyst said that he did not see any catalysts for growth on the horizon. Revenue and earnings estimates for 2001 and 2002 were lowered.

"We expect the stock will trade down and eventually find a $16 to $22 trading range for the near-term. We would be buyers of the stock below $15 given the company's excess cash position," Snyder added.

At First Union Securities, analyst Mark A. Roberts cut estimates and reiterated a "market perform" rating on Sawtek shares.

"There seems to be no end to bad news in this sector and consequently we would be very cautious on the shares," Roberts wrote in a research note.

"We believe the company has a high-quality management team. However, the current demand market appears to be an increasingly significant challenge, and longer-term the company is going to have to find new markets to keep growth visibility high," the analyst added.