Galileo tumbles on profit warning

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Galileo Technology Ltd. (Nasdaq: GALT) tumbled 27 percent Wednesday after it warned first quarter revenue and profits would be below analyst expectations. Several downgrades quickened its decline.

Shares were down 5 5/16 to 13 7/8 following the company's announcement after Tuesday's closing bell. Galileo, which supplies high performance, integrated circuit devices for the semiconductor industry, said revenues will likely be between $19.5 million and $21.0 million, a decline of 15 to 20 percent from the record $24.3 million it registered in the fourth quarter.

Galileo did not specify its estimates for profits per share, but said it would not meet analyst estimates. First Call had predicted the company would have a net income of 16 cents a share.

The lower sales were attributed to customers with strong inventory positions. Galileo also cited slim supplies of components.

Galileo also said it would take a one-time $2.5 million charge to increase inventory reserves and write off investments and intellectual property for discontinued projects that no longer fit with its strategy.

Only its first quarter should be impacted, Galileo said, and its focus should bring significant growth and profitability for the company late this year and into 2001.

Deutsche Banc Alex. Brown and SG Cowen cut their ratings on the stock, and Credit Suisse First Boston trimmed its price target in response to the news.

DB Alex. Brown analyst Jim Wade cut his rating to "market perform" from "buy."

SG Cowen analyst Rick Billy cut his rating to "neutral" from "buy," based on excess inventories and "shortage of a critical component." Billy also said Galileo could be acquisition candidate, and cut its earnings outlook for 2000 to 50 cents a share from 70 cents a share.

Credit Suisse First Boston analyst Charlie Glavin cut his price target on the shares to $20, and trimmed his earnings estimate to 44 cents a share from 73 cents a share.

Analysts had already cut their annual price targets on the company in January after management warned of weaker first quarter revenues.

Reuters contributed to this report.