We recently downgraded our recommendation on
) to Underperform from Neutral.
Earnings estimates have declined after the company slashed its
guidance for the fourth quarter of fiscal 2012. The company now
expects that the revenue in the fourth quarter will come in at 6%
lower than the mid-point guidance of $52 million provided
The new guidance was down $3.1 million, driven by softness in
both the Transport and Processor product families. The revenue
shortfall was primarily attributed to softness in the service
provider space and overall weakness in wire-line market.
Nevertheless, OTN revenue and sequential growth came through as the
company expected and did not account for any of the shortfall in
Applied Micro continues to expect earnings per share between
($0.10) and ($0.12) per share.
Consequently, two out of three analysts covering the stock have
lowered their estimates for fiscal 2012.
The company has been reporting losses since last year and we do
not expect the company to return to profitability before fiscal
Earlier, the company reported disappointing results for the
third quarter. Although earnings of ($0.10) were in line with the
Zacks Consensus Estimate, sales continue to be weak. Net sales came
in at $56.3 million, down 9.6% year-over-year and 13.2%
sequentially, failing to meet the Zacks Consensus Estimate of $59
million. Demand softness in the quarter was due to the clouded
Judging by the weakened macro conditions and weak outlook of
Applied Micro, we downgrade our recommendation to Underperform from
Our recommendation is supported by Zacks #4 Rank, which
translates into a short-term rating of Strong Sell.
APPLD MICRO CIR (
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