Sirf Technology shares plummet as analysts slash views

Feb.05, 2008 in Market Outlook

Analysts slash Sirf Tech views; shares plunge

By Rex Crum, MarketWatch

Last Update: 12:57 PM ET Feb 5, 2008

SAN FRANCISCO (MarketWatch) — Analysts who cover Sirf Technology Holdings Inc.
couldn’t downgrade the company fast enough Tuesday, reacting en masse after the
maker of GPS microchips reported an 89% drop in fourth-quarter earnings and gave
a first-quarter forecast that fell short of Wall Street estimates.

Sirf’s shares fell as much as 54%, hitting a 52-week low at $7.57, as at least
seven analysts cut ratings. They stood lately at $7.67, off 53% on the session.

The impetus for the massive selling was Sirf’s financial results and
weaker-than-expected first-quarter forecast, issued late Monday.

Sirf (SIRF) reported a fourth-quarter profit of $700,000, or a penny a share,
down from $9.1 million, or 16 cents, earned in the final three months of 2006.
Quarterly sales climbed to $100.4 million from the prior year’s $74.2 million,
Sirf said.

The company, whose microchips are used in a variety of GPS devices, also said
that for the first quarter, excluding one-time items, it expects to either break
even or lose as much as 4 cents a share, on revenue between $71 million and $77
million. Analysts’ average forecasts stood at 24 cents a share and $92 million,
respectively.

Chief Executive Michael Canning said that while the company saw strong demand
during the fourth quarter, pricing issues, competition and product mix combined
to hurt gross margin.

Many analysts echoed the opinion of Thomas Weisel Partners’ Heidi Poon. She cut
Sirf to market weight from overweight while slashed her price target on the
company’s stock to $12 from $31.

Sirf remains in a strong position in the GPS chip market, but “we believe
competition is heating up and certain growth drivers, such as wireless, have
limited near-term visibility,” Poon said in a research note.

Jefferies & Co. analyst Adam Benjamin went so far as to compare Sirf to the New
England Patriots, who lost Sunday’s Super Bowl to the New York Giants in one of
the biggest upsets in pro football history.

Benjamin cut his rating to hold from buy, saying “Sirf and the Patriots are
‘Giant’ disappoinments.” Benjamin also cut his target price on Sirf’s stock to $9
from $32, on the grounds that the company is likely to face more competition in
the market for personal navigation devices, or PNDs, as well as a delay in making
inroads into the wireless market.

Other ratings cuts came from Soleil Securities, Lehman Brothers and FTN Midwest,
among others.

GPS-related concerns spill over

Sirf’s softer-than-anticipated outlook could also portend more weakness for the
actual makers of GPS handsets, such as Garmin Ltd.

American Technology Research analyst Rob Sanderson said in a research note that
PND makers such as Garmin (GRMN) and TomTom (NL:38705) are major customers of the
products made by Sirf and competitors.

Sirf’s report suggests the first-quarter outlook for PNDs could end up being
between 1 million and 2 million units shy of his forecast pegging total sales at
5 million to 5.5 million devices, Sanderson told clients.

Shares of Garmin fell more than 10% to $62.30 in afternoon trading.

Did you like this? If so, please bookmark it,