Shares of Irvine chipmaker Microsemi Corp. slumped Friday after an analyst downgraded the stock on concerns about slowing orders.
The stock was down 10% near the close of trading on a market value of about $2 billion.
J.P. Morgan analyst Shawn Webster downgraded the stock from “overweight” to “neutral,” after Microsemi posted a lower-than-expected “book-to-bill” ratio,the number of pending orders versus fulfilled orders,for the three months ended Sept. 30.
Microsemi’s book-to bill ratio was 1.08 for the quarter ended Sept. 30, down from 1.13 in the June quarter.
The ratio is an indication of demand from Microsemi’s customers and future revenue.
If the ratio is greater than one, it means the company has more orders than it has delivered. If it’s less than one, it means it has fewer orders than it has already fulfilled.
Microsemi’s ratio is strong, but the quarterly decline didn’t please Wall Street.
“While the decline in the book-to-bill was modest, we are concerned upside to revenue estimates could become more limited if the declines continue,” Webster wrote in a note.
On Thursday, Microsemi said September quarter sales came in at $120 million, up 16% from $103 million a year earlier.
Including charges for stock compensation, write-downs on assets, acquisitions, restructuring and other items, the company posted a profit of $10 million, up 20% from $8 million a year ago.
Excluding the charges, the company earned $22 million, up 2% from $18 million in the year ago quarter.
Microsemi said it took nearly $10 million in charges for money lost for plants that were not running,another concern cited by J.P. Morgan.
On average, analysts were looking for a profit of about $21 million and sales of $119.2 million.
Microsemi makes chips for notebook computers, liquid crystal display televisions, satellites and a variety of devices for aerospace and defense customers.
