Cadence Design Systems Inc (CDNS)

[eastunder]

Cadence Design shares plunge to 13-year low; downgraded to sector perform at RBC

Thursday , July 24, 2008 10:12ET

BOSTON, Jul 24, 2008 (Thomson Financial via COMTEX) -- Shares of Cadence Design Systems Inc. tumbled to a 13-year low Thursday after the San Jose, Calif.-based company was downgraded to sector perform from outperform at RBC Capital, which cited the electronic design software maker's lowered 2008 revenue guidance.

The stock was down more than 30% to $7.12 on volume of 1.5 million shares, and hit a 13-year low of $6.99 earlier in the session. The issue's 30-day average volume is about 4.7 million shares.

Cadence cut its full-year revenue guidance to a range of $1.12 billion to $1.14 billion from a previous range of $1.49 billion to $1.54 billion. The current mean estimate of analysts polled by Thomson Reuters is for revenue of $1.51 billion.

"It would seem as though Moore's law is dead ... as management explained away a severe reduction in 2008 guidance by stating 'customers are staying on older process nodes longer'," RBC Capital analyst Mahesh Sanganeria said in a note to clients.

Sanganeria said customers "may indeed be deferring node-upgrade decisions" because of risk/reward reasons, but a more "mundane" explanation would be that Candence is seeing share loss.

"[W]e have lost visibility to a turn-around in revenue," Sanganeria said.

RBC Capital slashed its price target to $8 from $17.

The firm lowered its 2008 revenue estimate to $1.13 billion from $1.51 billion. Casey Logan cl/vj