Lexar Warns of Loss

An inventory overhang leads to a big shortfall.
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Lexar Media

(LEXR)

sank late Monday after the digital media outfit forecast an unexpected fourth-quarter loss.

The Fremont, Calif., company said it expects to lose 21 to 26 cents a share for the fourth quarter ended Dec. 31, on revenue of $240 million to $245 million. Analysts were looking for a 4-cent profit on revenue of $222 million.

Lexar said it expects to report overall gross margins in the range of 6% to 8%, with product gross margins in the range of 3% to 5%. The company cited the higher cost of goods sold and the lower-than-anticipated sell-through of higher-margin products, which remained in the channel at Dec. 31. Lexar also noted inventory reserves booked in the quarter as a result of competitive pricing pressures in the first quarter of 2006, and reserves taken against inventory for slow-moving and obsolete products due to changes in market demand and marketing strategy. Operating expenses were higher than planned, principally due to higher-than-anticipated legal and professional fees in the quarter.

After falling 40 cents during regular action Monday, Lexar shares dropped an added 45 cents in after-hours trading to $6.