Weak Silicon Lab Earnings Push Tech Stocks Lower

Brittney Barrett |

Following the success of Apple and Intel last week, investor enthusiasm toward tech companies had grown. Not all tech outfits; however, had such an impressive showing as proved by Monday’s earnings. Technology stocks fell sharply in the first day of trading alongside a broader market retreat and weaker-than-expected guidance from Silicon Laboratories (SLAB).

Silicon Laboratories plummeted on Monday in spite of surpassing Wall Street earnings expectations. The disappointing guidance, alongside better-than-predicted results heightened investor anxiety concerning a broader economic slow-down.

 

According to the company’s CEO, "The business is ready to sprint ahead on the legs of very strong products and share gains."  That; however, does not eliminate what was described as “weakening end-user demand” in several of the company’s markets.

 

Silicon Labs creates chips for markets ranging from televisions and telecommunication productions to infrastructure equipment. Because of the company’s exposure to varied markets, the results and guidance of SLAB are being seen as indicative of the broader health of the sector.

 

The results could be presumed among the reasons that semiconductor maker Texas Instruments Inc.’s (TXN) fell lower in after hours trading today. TI has also been suffering from weaker demand and reduced its outlook on the basis of waning demand from one of its largest clients, Nokia Corp. (NOK).

 

Another major chip maker, Broadcom Corp. (BRCM), also fell alongside TI on lowered expectations during trading hours. The losses were reversed after the bell though when the company reported better-than-expected earnings.  Broadcom earned $175 million, or 31 cents a share last quarter according to the report. Excluding one-time items, Broadcom would have earned $418 million or 72 cents a share alongside revenue growth of 12 percent to $1.74 billion. Analysts had predicted 64 cents a share on $1.8 billion in sales. For the next quarter Broadcom forecast sales ranging from between $1.9 billion to $2 billion with analysts expecting around $1.93 billion.

 

Not all tech related movement was the results of earnings; however. The long-ailing Research In Motion (RIMM) also sank sharply following the company’s announcement that it would cut approximately 2,000 jobs. A similar announcement from Cisco (CSCO) in recent weeks had the opposite impact on shares. Cisco said it would reduced its work force by 6,500 and received considerable approval from investors. Today though, Cisco fell victim to overarching market trends and joined Research In Motion in a dive lower on general pessimism regarding next quarter.

 

 

 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
BRCM Broadcom Corp. n/a n/a n/a 0
CSCO Cisco Systems Inc. 31.11 -0.24 -0.75 10,067,291
CYNA Cynapsus Therapeutics Inc. 40.18 -0.02 -0.05 82,252
NOK Nokia Corporation Sponsored American Depositary Sh 5.64 -0.02 -0.35 4,681,143
SLAB Silicon Laboratories Inc. 56.28 0.03 0.05 61,754

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