GlobeSpan announced Wednesday that its first-quarter profits will fall as much as 44 percent short of consensus analyst estimates.
In similar news, Virata, a communications software and semiconductors developer, posted its own warning today.
After market close Wednesday, GlobeSpan, a maker of DSL (digital subscriber line) chipsets, said it expects to report first-quarter earnings ranging between 10 and 13 cents per share, on revenue of $105 million to $115 million. Analyst consensus predicted a profit of 18 cents per share on revenue of $138.5 million, according to earnings tracking firm First Call.
Shares of GlobeSpan (Nasdaq: GSPN) traded at $20.25 in after-hours activity on the Island ECN, following the warning. GlobeSpan rose 75 cents to $24.63 in Wednesday's regular trading ahead of the news.
The company blamed the shortfall on the same issues cited by many suppliers to the communications industry.
"The long-term prospects for broadband deployment on a worldwide scale continue to offer exciting growth potential, but inventory issues that our customers have recently publicized and a slowing U.S. economy have persuaded us to revise our financial guidance for the first quarter of 2001," said Armando Geday, GlobeSpan's president and CEO.
GlobeSpan also lowered second-quarter projections. The company now sees second-quarter net income of 8 cents to 10 cents per share, on revenue of $100 million to $110 million. First Call consensus predicted a second-quarter profit of 17 cents per share on revenue of $149.4 million.
The lowered forecast was not entirely unexpected. Several brokerages--including Morgan Stanley this week, UBS Warburg and Frost Securities last week, and Thomas Weisel Partners earlier this month--recently lowered their GlobeSpan estimates, though not nearly to the extent of Wednesday's warning.
Those investment firms originally predicted GlobeSpan would earn 20 or 21 cents per share in the first and second quarters. Their subsequent revisions ranged from 15 cents to 18 cents per share.
"While we believe GlobeSpan continues to take market share in the ADSL and SDSL markets, we believe the 'buyers market' psychology has increased the risk that GlobeSpan could be subject to the negative effects of an inventory correction," Morgan Stanley analyst Louis Gerhardy wrote, in a research note released Monday.
Virata expects shortfall
Virata (Nasdaq: VRTA) also warned that its fourth-quarter results will fall dramatically short of analysts' estimates after the bell Wednesday.
The maker of communications software and semiconductors for DSL and network-equipment vendors said it will post a loss, excluding charges, of between 21 cents and 23 cents a share in the quarter on sales of 19 million.
First Call consensus expected Virata to earn 3 cents a share on sales of $45.9 million in the quarter.
Company executives said it would consolidate some of its manufacturing facilities and take a an unspecified restructuring charge in the quarter.
Virata blamed its shortfall on the some of the same causes GlobeSpan cited.
"Customers continue to have an oversupply of inventory which has resulted in canceled and rescheduled shipments of our chips to several customers in North America and Asia during the current quarter," said CEO Charles Cotton in a prepared release. "In the short-term, our visibility on Virata sales and earnings remains poor."
Virata shares closed off 94 cents to $11.75 ahead of the warning before falling to $9.88 in after-hours trading.
Last quarter, Virata earned $2.8 million, or 4 cents a share, on sales of $37 million.
Its shares peaked at $94 last March before falling to a 52-week low of $6.81 in January.