UPDATE 2-SiRF lowers Q1 rev outlook; to cut 7 pct jobs

Tue Mar 25, 2008 2:33pm EDT

Related Topics

(Adds company comments, updates share movement)

By Bijoy Anandoth Koyitty

BANGALORE, March 25 (Reuters) - Chipmaker SiRF Technology Holdings Inc SIRF.O lowered its first-quarter revenue outlook and withdrew its earnings view, buffeted by significantly lower orders from personal navigation device makers, sending its shares to their lifetime low.

SiRF, whose chips are used by navigation device makers TomTom (TOM2.AS) and Garmin (GRMN.O), also said it will cut 7 percent of its work force by September and take a pretax charge of $1.5 million to $2 million.

SiRF, which has about 750 employees, said it will also close offices in South San Francisco and Stockholm, Sweden, and cancel or reprioritize some engineering projects.

"This year, the slowdown of orders for PND applications has been particularly pronounced, and we no longer expect that these orders will meet our expectations," Chief Executive Michael Canning said in a conference call with analysts.

SiRF has been battling a decline in orders as personal navigation device (PND) makers are affected by a squeeze in consumer spending and rising competition.

Shares of the San Jose, California-based company were trading down 28 percent at $4.95 in afternoon trade on Nasdaq.

Prior to Tuesday's fall, the stock has lost more than 77 percent of its value since touching a high of $30.61 in November last year.

DIMINISHING DEMAND

The company, which earlier forecast breakeven to a loss of 4 cents per share, excluding items, for the first quarter, said the outlook "should no longer be relied upon."

The company said it expects first-quarter revenue of $60 million to $62 million, down from its earlier estimates of $71 million to $77 million.

Analysts on average were expecting revenue of $74.3 million for the quarter, according to Reuters Estimates.

"Although we had anticipated demand softness in the first quarter, we are disappointed that the expected demand ramp up late in the quarter did not materialize," Canning said.

There was a 50 percent reduction in demand from some customers from the prior forecast, while some others had reduced it even lower, he said.

Those customers discovered extra inventory in their manufacturing and selling charts, triggering the reduction, Canning said during the call.

PND drives SiRF's automotive segment, which is the biggest contributor to its revenue with a 65 percent share in the fourth quarter.

MOBILE TV HALTED

SiRF, which was planning to enter the mobile TV market, said it stopped further product development in the segment as the market has been "slow to ramp up."

The company did not expect significant near-term revenue from the segment and it would closely monitor the standards and market ramp up, Kanwar Chadha, one of SiRF's founders and a vice president, said in an Email reply.

Shares of Garmin, a dominant player in the PND field, were also hit by SiRF's negative comments. The stock fell about 8 percent to $57.70 in intraday trade but recovered partially to trade at $60.50.

Brokerage firm Piper Jaffray cut the stock of SiRF to "sell" from "neutral" on Tuesday, according to theflyonthewall.com.

Responding to a question, SiRF CEO Canning ruled out a possible sale of the company, saying, "the board has made it clear that the company is not for sale."

He also said the company would use its cash on hand for mergers and acquisitions, rather than buying back shares. (Editing by Gopakumar Warrier)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.