Banc of America Cuts Applied Micro Circuits' Earnings Estimates

The analyst cites recent warnings by Juniper and others.
By Dan Bernstein ,

Shaquille O'Neal

has one heck of an inside game, but he has a tough time from the foul line.

Banc of America

analyst Alex Gauna figures that just as basketball fans know this, investors should know that networking-component makers are not going to hit their own targets.

In a note published this morning, Gauna reduced his earnings estimates on

Applied Micro Circuits

(AMCC)

. The analyst wrote, "We should have thought that the Street had figured out long ago that Shaquille O'Neal had a better chance of improving his free-throw percentage to 100% in the NBA finals than networking component and equipment providers had of making their guidance for the June quarter." (For the record, Shaq finished the finals with a free-throw percentage of 52.5% and was named MVP.)

In late-morning trading, Applied Micro was off 53 cents, or 3.8%, to $13.54. Banc of America still rates the company a buy, with a $50 12-month price target.

Gauna cut his estimates for the current quarter's revenue to $48.5 million from his previous forecast of $73 million, now indicating a 60% sequential decline from the company's previous quarter. Gauna decided to change his estimate after warnings from

Juniper

(JNPR) - Get Report

,

Nortel

(NT)

and

Tellabs

(TLAB)

, and on concerns about inventory corrections.

Yesterday,

Goldman Sachs

analyst Nathaniel Cohn also

reduced his estimates on Applied Micro Circuits, citing the same three company warnings as signs that the rest of the sector will also face earnings shortcomings. In the same note, Cohn also revised his estimates on other semiconductor companies,

Conexant

(CNXT) - Get Report

,

PMC-Sierra

(PMCS)

and

Vitesse

(VTSS)

.

This morning,

Bear Stearns

analyst Charles Boucher similarly cut his earnings estimates on PMC-Sierra and Conexant, as well as

LSI Logic

(LSI) - Get Report

and

Linear Technology

(LLTC)

. Boucher wrote, "The June quarter has been more difficult than expected for most semiconductor companies, and we believe guidance for the September quarter is likely to be cautious. The stream of negative news could depress stock valuations toward previous lows."

Juniper, Nortel and Tellabs are networking companies, the major customers of chipmakers like Applied Micro Circuits. And while all three have already preannounced, Applied Micro has not. But Gauna wrote, "we are once again revising down estimates for AMCC as a warning to investors that we believe with strong conviction that the company is going to preannounce." Applied Micro Circuits is scheduled to report second-quarter earnings on July 18.

As a result of the revisions in revenue forecasts, Gauna's earnings-per-share estimates have also been lowered correspondingly. Gauna's EPS estimates for the current first-quarter 2002 are now a loss of three cents a share. For the full fiscal year 2002, Gauna now expects a loss of a penny a share, down from his previous estimate of a gain of four cents a share.

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