Virata Corp. said slack demand for its Helium devices will trigger lower-than-forecast revenues and earnings for its fiscal third quarter ending in December and its fourth quarter ending in March.
After suspending 40% of its Helium shipments for Westell, Virata expects its fourth-quarter revenues will be $37 million, compared with the company's previous forecast of $46.7 million. The company now estimates its earnings per share for the quarter will be 4 cents a share, compared with consensus estimates of 12 cents a share.
The news also triggered a freefall in the company's share price, which plummeted from yesterday's close of 14 1/16 to 5 7/8 a share earlier today.
``During December some of our customers indicated that their equipment inventories had not reduced as fast as they expected and therefore they had more Helium chips than they needed for their current production levels,''said Charles Cotton, chief executive for Virata. ``In order to minimize this inventory build up and maintain strong customer relationships, we have agreed to reschedule our product shipments to these customers. Based on recent market projections of strong global demand forDSL services, we expect the inventory overhang will be cleared in the early months of 2001.''
In calendar 2000, "the market exceeded all expectations as
worldwide DSL deployments exceeded the 1999 level by over ten times. In retrospect, however, it appears that this strong growth rate resulted in component shortages in the Spring and Summer of 2000, which led to customers ordering ahead of their requirements to ensure adequate supply. This resulted in the current inventory overhang, which we expect to clear in the early months of calendar 2001," he added in the prepared statement.