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Triquint, Sawtek fall in unison after warnings

Shares in the recently merged companies drop after both warn of disappointing earnings.

Shares of Triquint Semiconductor stumbled Thursday following a double dose of bad news. The company warned that its 2001 earnings will miss estimates and Sawtek, Triquint's merger partner, also said it would report disappointing results.

Triquint shares were off $4.22, or 17 percent, to $20.59 by market close. The communications chip maker's stock has been remarkably resilient to downgrades in the past, as analysts have maintained their outlook for the company's long-term prospects.

Wireless parts maker Sawtek saw shares off $4.86, or 17 percent, to $23.39. The two companies announced plans to merge in a $1.3 billion stock swap earlier this month. The companies said the merger was aimed at offering lower-cost and better-integrated components for mobile phones.

Citing the "biggest recession" ever in wireless and fiber optics on a conference call Wednesday night, Triquint cut its 2001 revenue targets by $40 million. According to First Call, Triquint was expected to report 2001 earnings of 51 cents a share on sales of $312.39 million. Most analysts now expect earnings of 24 cents a share on sales of about $260 million.

And Sawtek, the company Triquint recently agreed to buy, said its third-quarter earnings would now be in the range of 6 cents a share to 8 cents a share, well below First Call's estimate of 18 cents a share. Management also said revenue would be $17 million to $19 million, below the Street's expectations of $25 million.

Analysts said Triquint and Sawtek are being hurt by a slowdown in telecommunications, specifically wireless spending. Nokia and Ericsson are major customers, and the latter has been struggling of late.

C.E.Unterberg Towbin analyst Kaplesh Kapadia lowered the stock to "neutral" on the news and questioned the value of the companies' merger.

"Strategic benefits of the deal are still unclear," Kapadia wrote. The analyst also predicted the stock could "tread water" in the near term, and the news is a sign that things aren't looking good for the wireless handset market.

Other analysts also expressed concern about the company's sector and merger plans.

"We are increasingly concerned, as we are seeing the first signs of weakness in the company's historically stable broadband wireless business, which had previously given us comfort in our Street low numbers," wrote Credit Suisse First Boston analyst Michael Masdea.

The conference call didn't alleviate concerns about the company's strategy or the Sawtek acquisition, Masdea added.

Masdea maintained his "hold" rating on the stock but said that "it could be some time until revenue returns." His new 2001 revenue and earnings estimates are $260.9 million and 24 cents a share, down from $293.4 million and 45 cents a share.

Bear Stearns analyst Charles Boucher was more upbeat on the stock, maintaining his "buy" rating and 12-month price target of $50 a share, citing the company's strong design wins and the possibility of new products coming out of its merger with Sawtek.