Shares of Magma Design Automation Inc. lost a third of their value Friday morning after the microchip design software company offered a fiscal first-quarter outlook that was well below analyst estimates.
On Thursday, the San Jose, Calif., company said it expected adjusted earnings between 7 cents and 9 cents per share in the quarter ending Aug. 3. Wall Street expected a profit of 14 cents a share.
Magma shares plummeted $3.07, or 32.1 percent, to $6.50 after hitting $6.20 earlier in the session, their lowest since May 2005.
Needham analyst Richard Valera downgraded Magma to "Hold" from "Buy" in a note to investors Friday morning.
He said although he still expects Magma to outperform its competitors due to its plans to introduce new products, he was disappointed the company missed revenue guidance, reported "shockingly weak" backlog and cut its full-year revenue guidance.
"What a difference a quarter makes," Valera said.
The analyst slashed his fiscal 2009 forecast to 53 cents per share from 74 cents per share. Analysts polled by Thomson Financial expect earnings of 73 cents per share, on average.
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