Shares of Brillian tumbled 32 percent to their lowest level since the company was spun off in 2003 from electronics maker Three-Five Systems.
Brillian, which in August, did not detail why Sears ended the deal. A Sears spokesman was not available to comment on the matter.
However, the move comes less than two week after Brillian announced a disruption in its HDTV shipments and slashed its third-quarter revenue forecast to anywhere from $600,000 to $800,000 from its previous view of $2.8 million to $3.2 million.
The Tempe, Ariz., company is seeking a market for its advanced display chips--Liquid Crystal on Silicon, or LCoS, which are the core of its $8,000, 65-inch HDTV televisions.
Brillian is now accelerating discussions to look for new national distribution outlets.
"We were forced to reduce allocations to our audio video distribution channel," the company said. "We are now able to allocate a substantial portion of our fourth-quarter production to this customer base."
Brillian, which reported a loss of some $20 million last year, had previously forecast sales of 2,000 televisions a month by mid-2005, thanks to the Sears deal.
Brillian shares fell $2.65 to $4.35 in after-hours trading.