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Why Cavium Plunged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of semiconductor maker Cavium (Nasdaq: CAVM  ) have plunged today by as much as 12% after the company reported earnings along with soft guidance.

So what: Revenue in the first quarter totaled $52.7 million, with adjusted earnings per share of $0.02. On a GAAP basis, that bottom line was a net loss of $13.8 million, or $0.28 per share. On the subsequent conference call, the company also provided outlook that fell short.

Now what: Cavium expects second-quarter revenue to be in the range of $54 million-$56 million, with adjusted earnings of $0.01-$0.03 per share, while analysts were looking for more than $56 million in sales and $0.06 per share in profit. There's now talk that management may even be considering rethinking its consumer strategy and refocusing its efforts. Needham & Co. is still bullish, though, reiterating its buy rating with a $33 price target, believing revenue growth should resume next quarter.

Interested in more info on Cavium? Add it to your watchlist by clicking here.

Fool contributor Evan Niu holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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