Broadcomundefined shares get a chill from chip glut fears.
The Irvine, Calif., communications chipmaker fell 6% Tuesday after American Technology Research analyst Shaw Wu downgraded the stock to a sell on inventory concerns.
The rating cut comes as semiconductor giant
warned Monday that third-quarter sales would be light and that it would have to restate its financials to reflect possible stock option backdating.
said last month that it has $1.5 billion worth of its own stock option irregularities to correct in its past books, wasn't getting much benefit of the doubt from investors Tuesday.
"They're getting hit by poor semi fundamentals and Marvell's blowup last night," says one Wall Street money manager.
The chipmakers have had a string of disappointments in the past month. AmTech's Wu counts Marvel as the 11th semi shop to warn of a sales or earnings miss. The chip slowdown suggests "a buildup of component inventory across multiple end markets," says Wu.
Broadcom's strength in the digital TV supply may help offset some of the weakness in networking and WiFi in the third quarter ended last week, bringing results in line with Street expectations says Wu. But high inventories will probably dampen Broadcom's outlook for the December quarter and possibly the first half of next year, he notes in his report Tuesday.
Broadcom shares were down $1.89 to $29 in late morning trading Tuesday.