"In the past few weeks we have experienced a slowdown in bookings, due to what appears to be a near-term softening of the consumer electronics market, resulting in weaker demand for cordless telephony products," said DSP Group Inc. (Nasdaq: DSPG) CEO Ofer Elyakim to explain the 10% cut in the company's full-year guidance to $200-207 million from $227-245 million. The updated guidance means an 8-11% drop in revenue from 2010.
DSP Group, which develops wireless chipset solutions, predicts that revenue for its products for cordless phones will fall to $179 million in 2011, 13% less than in 2010. It expects sales of new products to grow 56% to $25 million, but that is still less than its guidance published earlier this year.
DSP Group's revenue fell 4% to $58.5 million for the second quarter from $60.8 million for the corresponding quarter of 2010.
The company's GAAP-based net loss rose to $2 million ($0.09 per share) for the second quarter from $367,000 for the corresponding quarter. Non-GAAP net profit was halved to $2.03 million ($0.08 per share) from $4.4 million for the corresponding quarter.
Cash and cash equivalents were almost unchanged at $137.2 million at the end of June, amounting to $5.85 per share.
Due to the drop in demand and the lower full-year guidance, DSP Group's board of directors announced a streamlining plan to cut operating costs by $5 million. The company currently has 440 employees, including 280 in Israel. The streamlining does not include layoffs in Israel.
DSP Group also has to deal with shareholders. Last month, US equity fund Ramius LLC spinoff Starboard Value and Opportunity Master Fund LLC announced that it had bought 11.2 million shares in the company, reaching a stake of 6%. Ramius, which has caused much grief for Zoran Corp. (Nasdaq: ZRAN), including opposing its acquisition by CSR plc (LSE: CSR), has not yet approached DSP Group's management with any proposals or demands to convene a shareholders meeting to make decisions. Nonetheless, DSP Group's board has decided to take proactive measures.
The board has decided on a poison pill, under which if a new shareholder reaches a 10% holding in the company, this will permit current shareholders to buy new Series B shares at a much lower price than the current share price. The poison pill will not apply to Blackrock, DSP Group's largest shareholder, which already owns 18% of the company.
The board also greatly increased DSP Group's share buyback to 2.6 million shares, equal to 11.1% of the company.
DSP Group's share price opened at $8.31 today, giving a market cap of $195 million.
Published by Globes [online], Israel business news - www.globes-online.com - on July 26, 2011
© Copyright of Globes Publisher Itonut (1983) Ltd. 2011