Shares of Aliso Viejo-based Smith Micro Software Inc., a maker of cell phone software, fell Monday after an analyst downgraded the stock.
The stock closed down 13% on Monday on a recent market value of about $166 million.
JP Morgan analyst Lauren Ye downgraded Smith Micro to “neutral” from “overweight” after Chief Executive William Smith’s recent comments at an investor conference gave cause for concern.
In a note to clients, Ye said the company is set to see slower sales to top customer Verizon Wireless, a New York-based unit of Verizon Wireless Inc.
Smith Micro makes and services the software the runs Verizon’s online music store,sort of like an iTunes program for its phones.
Verizon is switching to selling its cell phones with prepackaged software for downloading music and ringtones. Before, Verizon was selling the software separate from the phones as a “music essentials kit.”
Verizon makes up roughly 68% of Smith Micro’s sales.
Ye cut her fourth quarter revenue estimate to $20 million, down from her previous estimate of $22 million. She also reduced her fourth quarter profits estimate to $1.5 million from $4 million.
Ye also said the company may see higher expenses from its $60 million cash acquisition of Bloomingdale, Ill.-based PCTel Inc., also a maker of cell phone software, in December.
She estimates the company will see more than $12 million in additional general and administrative costs after it integrates PCTel’s employees into the company.
“Those expenses could cause margins to be less than what the Street expects for the first quarter,” she said.
Ye cut her yearly profit estimate for 2008 to $17 million from $25 million.
The company’s shares are down some 20% in the past three months.
Smith Micro is set to report fourth quarter results March. 5.
Analysts are looking for profits of $7 million on sales of $22 million.
