Mentor Graphics Slumps on Weak Outlook

Shares are down 13.7% to $5.25 in morning trading.

Author:: Ivy Lessner
Publish date:: Nov 11, 2008 11:04 AM EST

SAN FRANCISCO -- The struggling economy is taking a toll on

Mentor Graphics

(MENT)

, which warned Tuesday it would post a loss for the third quarter on lower-than-expected revenue.

Shares plummeted 13.7% to $5.25 in morning trading. For the quarter ended in October, the developer of software tools for the design of semiconductors said it will lose 5 cents a share, excluding charges, on revenue of $185 million. Analysts polled by Thomson Reuters were expecting earnings of 15 cents a share, excluding charges, on revenue of $215.1 million.

Wilsonville, Ore.-based Mentor announced it would post full results Nov. 19, before the regular trading session opens.

For the fourth quarter of fiscal 2009, the company said it expects revenue of $270 million and earnings, excluding charges, of 55 cents. Analysts were looking for revenue of $318.6 million and an adjusted profit of 93 cents a share.

"Typically, our customers had been negotiating contract renewals a quarter or two before their expiration," Chairman and CEO Walden Rhines said in a statement. "In this economic environment, customers are now waiting until the contracts come closer to expiration to renew. We expect a number of sizeable contracts to renew in the next several quarters, which should lead to a stronger fiscal 2010 than fiscal 2009."

For the first quarter of fiscal 2010, Mentor projects revenue of $200 million to $210 million and earnings of 5 cents to 10 cents a share, excluding items. Analysts were anticipating revenue of $199.4 million and adjusted earnings of 9 cents.

"These contract renewal delays should produce greater business linearity in fiscal 2010," President Gregory Hinckley said in a statement.

Competitor

Cadence Design Systems

(CDNS) - Get Report

has struggled in 2008 with falling revenue and internal issues. In recent weeks, Cadence delayed reporting its latest results, pending a restatement of earlier quarters, and announced layoffs.

Synopsys

(SNPS) - Get Report

, the leading developer of chip-design software tools, is expected to report results Dec. 3.