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Lousy 2Q results, bleak outlook drag Cadence lower

Software developer Cadence Design Systems Inc. (NYSE: CDN) plunged 3, or 20 percent, to 11 7/8 Wednesday after reporting a huge unexpected loss in its second quarter.

In the quarter, Cadence lost $3 million, or 1 cent a share, on sales of $264.2 million.

First Call consensus pegged the San Jose, Calif. company for a profit of 20 cents a share in the quarter.

Making matters worse, company officials said its third-quarter sales will be even worse.

The second-quarter sales of $264.2 million represented a 16 percent decline compared to the year-ago period when it earned $59.5 million, or 23 cents a share, on sales of $315.7 million.

On Wednesday, SG Cowen cut the stock from a "buy" recommendation to "neutral" while BancBoston Robertson Stephens, apparently looking to call the low, issued a lukewarm upgrade from "market performer" to "long-term attractive."

In its earnings report, Cadence said it had a new way of licensing some of its products which would result in revenue being recognized over a different time period. That would result in a drop in sales in the third quarter compared with the second.

The change in its licensing also played a large role in the revenue and profit shortfall in the second quarter, company officials said.

Cadence said it expected year-over-year sales growth to resume in the second quarter of 2000.

In late April, Jack Harding resigned as chief executive a week after the company said sales and profits would be hurt for the rest of the year. Ray Bingham, then the company's chief financial officer, assumed the title of CEO.

At the time the company blamed the sales and profit shortfalls on semiconductor makers not upgrading their technology as quickly as expected. The day after the warning, Cadence's share price plummeted 40 percent.

The stock peaked at 34 1/8 in January before falling to a 52-week low of 10 5/8 in May.

Eleven of the 13 analysts following the stock rate it a "hold."