C-Cube stock takes a plunge

The digital video maker's stock plummets after company warns of disappointing earnings.

Dawn Kawamoto Former Staff writer, CNET News
Dawn Kawamoto covered enterprise security and financial news relating to technology for CNET News.
Dawn Kawamoto
2 min read
Shares of C-Cube (CUBE) plunged as low as 24 percent today, after the company said its second-quarter earnings and revenues will fall short of Wall Street expectations.

C-Cube, one of the most actively traded issues on Nasdaq, traded as low as 19-3/8, down from its close of 25-1/2 yesterday.

The digital video silicon solutions developer said today it expects its earnings for the quarter ending June 30 to range between 20 to 25 cents a share. Analysts had expected the company to report earnings of 40 cents a share, according to First Call.

Revenues are expected to reach between $70 million to $75 million for the quarter.

In the previous quarter, the company posted revenues of $94 million and earnings of 41 cents a share. But that quarter marked the first time in more than seven consecutive quarters that the company's revenues did not grow sequentially.

The company also pointed to price cuts--part of an effort to remain competitive--as another contributor to its sluggish performance.

C-Cube cited slow sales of its MPEG1 decoders, which are used in Video CD players, as the main reason for the lower-than-anticipated earnings. The MPEG1 decoders are sold primarily in China.

Until DVDs become a mass market phenomenon, a large part of C-Cube's fortunes rest in the Asian Video CD markets.

"Video CDs are a significant market for their MPEG-1 chips. Probably 80 percent go to China, and the rest are in other Asian markets," said Terrrence McCrary, vice president of research at Stamford, Connecticut-based financial analyst company Auerbach, Pollak & Richardson. "But DVD is their growth product."

Companies that design inexpensive Video CD players say they have had problems incorporating C-Cube's new lower-priced decoders into their products.