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Chip maker Conexant stock drops on weak forecast, Merrill Lynch rating cut to neutral

Chip maker Conexant stock drops on weak forecast, Merrill Lynch rating cut to neutral

Shares of Conexant Systems Inc. slid Friday after news about the communications chip maker's latest financial results.
The Newport Beach, California-based company posted fiscal first-quarter earnings that fell short of Wall Street's expectations and offered a tepid forecast for its second quarter.
Conexant's stock also took a hit on a downgrade by Merrill Lynch to "neutral" from "buy."
In a research report issued Friday, Merrill Lynch analyst Mark Heller said Conexant's revenue target for its fiscal second quarter will likely put the stock in the "penalty box" for the next few quarters. What's more, the analyst said that Conexant's problems could last more than two quarters and that there are few catalysts for the shares until 2008.
The stock's weakest level Friday, on heavy volume, was $1.74 (euro1.35). On a 52-week basis, there was a low of $1.60 (euro1.24) on Aug. 8 and a high of $3.90 (euro3.02) on April 27.
Late Thursday, Conexant posted a fiscal first-quarter profit of $976,000 (euro756,530), or less than a penny a share, for the period ended Dec. 29. Analysts surveyed by Thomson Financial had forecast, on average, earnings of 2 cents a share.
Revenue came in at $245.5 million (euro190.3 million), generally in line with the average analyst estimate of $245.6 million (euro190.37 million). For its second quarter, Conexant is targeting a revenue decline of 8 percent to 10 percent from the first quarter.
The stock was down 18 cents, or 9 percent, to $1.83 in late-morning trading on the Nasdaq Stock Market.