Despite Own Good News, Local Tech Stocks Take Hit CORPORATE FOCUS By SHELLY GARCIA Senior Reporter The biggest technology stocks in the San Fernando Valley have taken a beating over the past few weeks, with shares losing an average of more than 11 percent of their value since the beginning of the month. The trend mirrored the national landscape and affected nearly all of the region’s technology stocks, but those in the semiconductor and wireless sectors bore the biggest brunt. Chief among them, Diodes Inc. declined by more than five points since July 2 and Vitesse Semiconductor Corp. lost 86 cents during the period. Westlake Village-based Diodes is a supplier of semiconductors and Camarillo-based Vitesse makes components and technologies for the networking, communications and storage industries. “The last couple of weeks have been pretty challenging because of all the bad news,” said Dave Kang, senior research analyst with Roth Capital Partners in Newport Beach. “Investors think if company x is having problems, then company y must be having the same problem as well.” The latest downslide in the tech sector began late in June when Deutche Bank downgraded its rating on Intel and a string of troubling data began to trickle out. A jobs report indicated a slowdown. More than 30 tech companies issued warnings for the second quarter. And Merrill Lynch downgraded the semiconductor sector saying demand for computers and components on both the consumer side and the commercial side was weaker than expected. It didn’t seem to matter that the Semiconductor Industry Association reported sales in the sector had increased in the most recent period, or that some companies were reporting stronger results. The slide continued. By last week the Dow Jones Industrial Average had declined by double digits and both the Nasdaq Composite Index and the S & P; 500 were off by about a point. The Philadelphia Semiconductor Index by Thursday, July 15 had fallen nearly 6 percent to $418.53. “Somebody like Intel, when they sneeze everybody else catches a cold,” said Kang. Contrary to reports Indeed some of the most dramatic stock price declines in the Valley occurred to companies that actually had good news to report. Diodes in June increased its revenue growth guidance, projecting that the company would see sequential revenue growth between 9 percent and 11 percent for the second quarter ended June 30. Previously, Diodes had said it expected revenues to grow sequentially by 4 percent to 6 percent. “Halfway into 2004 demand is running ahead of our expectations,” said C.H. Chen, president and CEO of Diodes in announcing the revised guidance. “Order cycles are lengthening. Inventory at our distributors remains moderate.” Neither the raised guidance nor the indications that Diodes’ customer base seemed on more solid footing would do much to stem the slide in the company’s stock price, which dipped to the $18 range by the end of last week, down 22 percent from $23.47 on July 2. Vitesse, which moved into the black for the first time this year since 2001, also seemed to get no traction from its performance. The Thomson First Call consensus projected that when Vitesse announces its third quarter results this week it will report earnings of $0.02 per share, compared to a loss of $0.04 per share in the same period last year. But shares in Vitesse closed the week in the mid-$3.00 range, down about 19 percent from its close of $4.51 on July 2. Share price sinks Power-One Inc., which will report its second quarter results later this week as well, has seen its share price decline by about 9 percent since the beginning of July, closing on Thursday, July 15 at $9.63 a share. That downward spiral continues even as the Camarillo-based supplier anticipates a sequential sales increase for the second quarter and a return to profitability in the third quarter of the year, although First Call estimates project a net loss of $0.01 for the second quarter. “Looking forward we expect to see continued quarter-over-quarter revenue increases in 2004 as the market recovery takes hold and demand continues to increase,” said Steve Goldman, the company’s CEO in a report on the company’s first quarter performance. Most of the other tech firms in the Valley area have seen their share prices decline by high single digit percentages since July 2. Among them, Semtech Corp. shares were trading in the high $19 range after closing July 2 at $21.50. Shares of Optical Communication Products Inc. in Woodland Hills were off by about 6 percent. MRV Communications Inc., which has said it expects continued revenue increases and improvement in its bottom line (although the company is still operating in the red) in the second quarter when it reports on July 22, has seen a 9 percent decline in its shares, which closed last week in the $2.30 range.
