Shares of Microsemi Corp., the Irvine-based maker of chips for military and industrial uses, slumped Thursday after an analyst cut his estimates on the stock and lowered his profit expectations.
Investors sent shares down 6% on a recent market value of $762 million.
Friedman, Billings, Ramsey & Co. chip analyst Craig Berger cut his price target for Microsemi to $16 a share, down from $21.
Microsemi closed at $9 on Thursday.
In a note to clients, Berger said Microsemi’s customers have been reluctant to hold on to any inventory, making it tougher for the company to predict ordering cycles and sales.
“We commend the management for posting 16 consecutive quarters of sequential revenue growth, though it now seems the global credit crunch is impacting how much inventory customers will hold,” he said.
Berger lowered his profit outlook for the rest of this year and for 2010.
He now expects the company to post 2009 profits of $63 million, down from his previous estimate of $76 million in profits.
Wall Street analysts, on average, are looking for 2009 profits of $76 million on sales of $455 million.
For 2010, Berger is looking for profits of $77 million, down from a previous outlook of $93 million in profits.
Analysts are expecting 2010 profits of $78 million on sales of $468 million.
Berger said the lower estimates account for “increased legal risk” Microsemi faces as it comes under review by the Securities and Exchange Commission to see if Chief Executive Peterson’s denials of allegations he lied about his education misled investors.
Last month, Microsemi’s board chose to back Peterson after he was found to have lied on his official biography about his education.
Directors handed down a list of penalties to the executive, who is expected to a pay $100,000 and forgo his bonus for the year, among other actions, for lying about degrees from Brigham Young University.
“While we have no specific insight into the informal SEC investigation, we generally believe that these issues can take multiple quarters,if not several years,to fully play out,” Berger said. “Investors should expect this overhang on the stock to last and that shares may not bounce back quickly unless the SEC closes its investigation.”
Microsemi’s shares are off about 50% in the past 12 months.
