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What: Diodes (Nasdaq: DIOD) dropped 14% in intraday trading today after the company lowered gross margin guidance for the current quarter.

So what: Management now expects gross margin of 31% to 33% in the second quarter, below previous guidance of gross margin comparable to the first quarter's 35.5%. It blamed the disappointing news on a shift due to a softening of demand and a slower than expected recovery from previously disclosed manpower shortages at its China packaging facilities.

Now what: The company reiterated guidance for revenue, operating expenses, tax rate, and shares outstanding. Thus, the lower gross margin is likely to lop about $0.09 off the consensus estimate of $0.51. Looking beyond the second quarter, management's comments suggest the challenges -- particularly weak demand -- could persist.

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