Shares of microchip design company Magma Design Automation Inc. plunged Friday after it said it expects first-quarter profit well below Wall Street expectations.
Shares fell $2.57, or 26.9 percent, to close at $7. They earlier hit a year low of $6.20 after trading in the past year between $8.48 and $15.70.
The San Jose, Calif.-based company said it expects a profit of 7 to 9 cents per share, excluding one-time costs and gains. That's well below Wall Street expectations. Analysts polled by Thomson Financial forecast a profit of 14 cents per share. Analysts typically exclude one-time items.
Cowen & Co. analyst Raj Seth said in an investor note said the company also guided for a fiscal 2009 well below Wall Street expectations after losing four or five major deals in the 2008 fourth quarter.
He said the company had a "big miss."
"We smelled smoke, but not this," he added.
Seth saw an overextended product line as a fundamental problem.
"At the core of the problem is the ongoing transition toward a next generation digital platform while simultaneously rolling out newer products ... Magma got too ambitious and got caught," he said.
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