|MIPS Technologies (Nasdaq: MIPS )||***||(24.1%)|
|Broadcom (Nasdaq: BRCM )||***||(12.3%)|
|Zix (Nasdaq: ZIXI )||***||(9.4%)|
The bulls are back and continue to run higher on the big earnings reports companies are turning in. Stocks jumped another 95 points yesterday, or almost 1%. So stocks that went down by large percentages are pretty big deals.
The devil's in the details
Like fellow Fool contributor Tim Beyers, I was hip to chip designer MIPS Technology being a market beater. It was scoring contract wins for mobile computing devices using Google's (Nasdaq: GOOG ) Android platform, and Sigma Designs (Nasdaq: SIGM ) was betting big on the MIPS processor design. Stealing market share from ARM Holdings (Nasdaq: ARMH ) was just ahead.
Although investors got spooked in the second quarter as revenues dipped below what was expected, management soothed ruffled feathers by telling investors to wait and see what the next quarter would bring. It was just a timing issue, they said, and the current quarter will recognize the deals it signed previously. Well, the current quarter came and went and MIPS Technologies disappointed in a big way. Not only did it miss on revenues and earnings, but also guidance for next quarter was reduced and royalty revenues are expected to fall 8% to 10% year over year.
Once again, management is telling the market not to worry, that "it's a marathon, not a sprint." Unfortunately, it seems MIPS executives like to over-promise and under-deliver, the exact opposite of what investors want in their companies.
If I'm willing to cut the chip designer any slack at all it is because its biggest customer, Broadcom, reported a disappointing quarter, too. The combination of the two announcements probably fed into each other and drove their share prices down.
CAPS members like All-Star CH37 see the steep plunge as an opportunity and are eager to buy MIPS on the dip. I'm not so sure. If Broadcom is also suggesting a slowdown, then it might be a worrisome trend developing.
Similarly, CAPS member cz4ever agrees with MIPS management that this is a long-term play, and says Broadcom will still experience growth because mobile communications is just hitting its stride:
Their latest generations of chips for both the mobile (smartphone) and ethernet switch (so-called "top of rack" routers) markets seem to be winners. High demand. Reasonable price point after weak past 12 months -- Mr. Market is offering them up at a modest discount.
Cracks in the foundation
For email encryption specialist Zix, although its guidance for next quarter was below what analysts were hoping for, its full-year guidance was right in line, so it seems the near-10% chunk the market took from its valuation yesterday is rather shortsighted. It seems as though it ought to be just a temporary dip.
Moreover, when there are security breaches such as the one that occurred with the 77 million Sony PlayStation accounts, it serves to underscore the need for heightened protection.
While almost 30% of the CAPS members rating Zix think it won't be able to decipher the code to beat the broad market indexes, steelgreg thinks its growing client list will help boost its prospects:
Security is a large issue and getting larger. ZIXI is currently working with some government agencies and its involvement will most likely grow
Add Zix to your watchlist and see whether the stock can unlock the secrets to higher profits.
Ready for a resurrection
Just because your stock has taken a beating doesn't mean it's going to roll over and die. Markets are known for overreacting. A closer look on Motley Fool CAPS at what's happened to your stock can give you an edge over other investors who just react to the market's lead. You can decide for yourself whether it's ready to come back from the dead.