The semiconductor earnings warnings continue to roll in, and things seem to be getting worse. TranSwitch yesterday had to significantly lower guidance it revised less than three weeks ago. Following a now-predictable formula, the company complained of poor short-term visibility, but says things should improve soon.
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Another day, another semiconductor warning. Well, better make that two: Both TranSwitch (Nasdaq: TXCC) and Vitesse (Nasdaq: VTSS) did the honors today. (Rick Aristotle Munarriz covered Vitesse in this morning's Breakfast News.) Today's events are not nearly as bad as what happened three weeks ago, when no less than seven semis warned in one day. I can't even count the total number of warnings we've seen from this industry, but both TranSwitch and Vitesse have had to go through the paces twice now in just three weeks. It has all become rather formulaic, and TranSwitch, which makes integrated circuits and other components for manufacturers in the communications and networking industries, followed the formula to the letter in its press release: A gentle way of saying "warning" in the first paragraph The reason behind the warning More bad news for future quarters A plea for long-term perspective A best guess for when we'll see some improvement While investors were relatively kind to TranSwitch after its last warning, they're showing far less compassion today. Shares of the company are down about 18% in the early afternoon, to 15.38. The 52-week high is 74.68. Rex Moore is semi-depressed about the semiconductor industry, but owns no shares in the companies mentioned in this story. His holdings and the Fool's disclosure policy may be viewed online anytime.
TranSwitch used the phrase "...today updated the outlook for its financial performance for the first quarter, 2001." On March 8, President and CEO Santanu Das lowered first-quarter revenue guidance to $51 million, and projected earnings per share in the $0.16 to $0.17 range. The consensus estimate had been $0.19 a share. Today, Dr. Das guided investors significantly lower than that, saying he now expects only about $38 million in revenue and earnings of $0.09 to $0.10 a share.
According to Das, TranSwitch received information from some of its larger customers that North American business "is still on a downward slope with increased cancellations and push-outs of orders." Das says conditions in Asia and Europe are still steady. International orders, however, constituted just 30% of TranSwitch's total revenues last fiscal year.
Das says the company can hope for, "at best," a flat second quarter sequentially. This points to the major problem investors are having with semis these days: Lack of visibility. When the outlook changes this drastically in just three weeks -- and the company's boss is using terms like "at best" for future quarters -- that means the atmosphere of uncertainty investors so loathe is still hanging on tenaciously.
This almost always contains the phrase "we remain excited." In this case, Das points to continued design wins and new products that are currently being sampled by customers.
Even with poor visibility, most semis say they see some light at the end of the tunnel. Das says TranSwitch's business conditions might start picking up as early as June.
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