Dire Forecast Sinks Cadence Design

The company's stock plunges after it issues an outlook far below analysts' estimates.
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SAN FRANCISCO -- Shares of Cadence Design Systems (CDNS) - Get Report plunged Wednesday after it issued a forecast that wipes out much of the Street's full-year earnings' expectations.

The San Jose, Calif., company projected third-quarter revenue ranging from $235 million to $245 million and a per-share loss of 9 cents to 11 cents. Analysts were expecting a top line of $412.8 million and EPS of 40 cents, excluding special items.

For the full year, the design software developer projected revenue ranging between $1.12 billion and $1.14 billion, with EPS ranging from 1 cent to 5 cents. Analysts had projected revenue of $1.51 billion and EPS of $1.16.

The dire forecast, which came with the release of the second-quarter earnings, sent the stock down $2.77, or 27%, to $7.50 in after-hours trading.

For the second quarter, the company reported revenue fell 15.7% to $329.5 million, from $391 million in the same quarter of last year. Analysts were expecting a top line of $316.2 million, according to Thomson Reuters.

Net income plummeted 91.6% to $5 million, or 2 cents a share, from $59.6 million, or 20 cents a share, in the year-ago period.

Excluding special items, EPS was 14 cents, in line with analysts' expectations.

"Although we achieved our Q2 numbers, it was more difficult than we planned," CEO Mike Fister said in a statement. "As a result, we've made the decision to lower our outlook."

The results throw into doubt the company's aspirations to grow through a sizeable merger.

In June,

Cadence disclosed its bid to buy competitor

Mentor Graphics

(MENT)

for $1.6 billion, or $16 a share. Mentor declined the offer but has hired banking advisers on a potential deal.

Mentor and mutual rival

Synopsys

(SNPS) - Get Report

will report earnings in August.