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Lattice's CFR & SGL Ratings Cut by Moody's; Outlook Stable

Moody's Investors Service - the rating unit of Moody's Corporation MCO - downgraded Corporate Family Rating (CFR), Senior Secured Term Loan (Term Loan) and Speculative Grade Liquidity (SGL) ratings on Lattice Semiconductor CorporationLSCC . However, the outlook was stable.

Moody's lowered Lattice's CFR and Term Loan ratings to B2 from Ba3 anticipating revenue decline and lower cash flow. The rating agency believes that the company faces significant integration and execution risks related to the recently completed Silicon Image acquisition.

Terry Dennehy, a senior analyst at Moody's, believes that weakness from one of Lattice's largest customers, a slower-than-anticipated growth in product wins with Chinese smartphones and the slower ramp up of the new 4G base station construction in China will impact Lattice's sales in the near term.

Additionally, Moody's believes that lower revenues and the resultant decline in profitability will impact the company's free cash flow (FCF) and liquidity profile. It expects Lattice to generate breakeven to slightly negative FCF, and debt to EBITDA ratio above 6x over the next year. Thus, Moody's lowered the SGL rating on Lattice to SGL-3 from SGL-2.

Lattice reported a decline in cash and cash equivalents to around $138.1 million as of Jul 30 2015, from $159.8 million in the prior quarter. Cash from operations during second-quarter 2015 also went down to ($0.9) million from $6.6 million in the first quarter. Long-term debt remained flat at $3.4 billion as of Jul 30, 2015.

Lattice's results have been negatively impacted by economic weakness, operational inefficiencies and competition. Operating results were also hurt by restructuring costs, divestitures and unfavorable currency translation.

Lattice Semiconductor designs, develops and markets high-performance Programmable logic devices and related development system software. The company reported weak second-quarter results incurring a loss of 10 cents per share, wider than the estimated loss of 3 cents. However, revenues were $106.5 million were up sequentially as well as from the year-ago period.

Lattice currently carries a Zacks Rank #5 (Strong Sell). Some better-ranked stocks in the same sector are Applied Optoelectronics, Inc AAOI , Avago Technologies Limited and ARM Holdings plc ARMH . All the stocks have a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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