Tough Lesson for Mentor Graphics

The software designer cuts guidance, citing widespread weakness.
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You could call it a graphic reminder about the impact of profit warnings.

Mentor Graphics

(MENT)

shares sharply fell early Tuesday, after the software designer lowered earnings guidance because of widespread weakness in its business.

The company said it sees revenue of approximately $165 million and earnings per share before severance costs and amortization of intangibles to be approximately break even. On a GAAP basis, the company expects a loss of approximately 5 cents a share.

Previously, the Oregon-based company forecast revenue of $177 million and earnings excluding items of 5 cents to 10 cents a share. On a GAAP basis, it forecast a profit of 1 cent to 6 cents a share.

Mentor cited "severance costs and amortization of intangibles" as key items.

Analysts expect revenue of $176.5 million and EPS of 8 cents, according to Thomson First call.

"This quarter saw significant year-over-year weakness in all notable product lines and in all regions," the company said in a statement. "Book to bill was extremely weak and the company consumed substantial backlog."

Merrill Lynch and Wells Fargo Securities downgraded the stock to neutral and hold, respectively.

Mentor will report quarterly results and update annual guidance April 26.

Shares fell $2.16, or almost 16%, to $11.49 in premarket trading.