ESS Tech shares slide on talk of rival contract
NEW YORK, Feb 15 (Reuters) - Shares of ESS Technology Inc. (NasdaqNM:ESST - news) tumbled on Friday as investors appeared to respond to talk a rival chipmaker had won a contract with electronics maker Samsung Electronics Co. Ltd. 05930.KS>
Shares of Fremont, California-based ESS slipped to a session low of $17.95 before closing at $19.06, off $2.50, or 11.6 percent.
Analysts said investors may have balked at talk a competitor had been awarded a technology design contract -- often called a ``design win'' -- with Korea's Samsung, a leading maker of consumer electronics devices, to provide DVD chips.
But analysts said the company's outlook remains sound.
``There are three design wins that are up for grabs at Samsung, and one of them might have gone to a competitor,'' C.E. Unterberg, Towbin analyst Kalpesh Kapadia said. ``But that doesn't mean that ESS has been shut out.''
The competitor in question was Zoran Corp. (NasdaqNM:ZRAN - news), Kapadia said. Representatives from Zoran were not immediately available to comment on its recent design wins.
Jim Boyd, chief financial officer at ESS, told Reuters that a long-term battle exists in the market to see who will be the leading supplier to large DVD makers such as Samsung. Those roles have not been determined, he said.
``We are getting some design wins at Samsung and Zoran is now announcing some design wins at Samsung,'' he said. ``With these large DVD accounts, you are going to have a primary supplier of chips and a secondary supplier. ... I don't think that will become known until 2003.''
C.E. Unterberg's Kapadia, who rates ESS shares at ``buy,'' said the company is solid, and has a strong position in the DVD market.
``We believe the robust growth of DVD players will continue in 2002 and beyond and ESST will maintain its leadership position,'' he wrote in a recent note to clients.
Needham & Co. analyst Dan Scovel said investors may also have been unnerved by the recent announcement of some insider selling at ESS last month and an upgrade to Zoran shares by an analyst at Salomon Smith Barney.
``But that is all sort of yesterday's news,'' he said. ``We are confident that business in the near term is doing pretty well.'' |
