ESS shares tumble after Barron's article
NEW YORK, Aug 5 (Reuters) - Shares of digital video disc chip maker ESS Technology Inc.(NasdaqNM:ESST - News) fell nearly 11 percent Monday after an article in Barron's newspaper questioned how it will fare in an increasingly competitive arena.
In early afternoon trading, ESS was down $1.25 to $10.45 after falling as low as $9.01 earlier in the session on Nasdaq.
A.G Edwards analyst Peter Andrew said some of the facts, particularly statements concerning the company's past gross margins and competition from Taiwanese rivals, such as MediaTek were either old or incorrect.
"This is not news," Andrew said.
A representative from Barron's could not be reached immediately.
Rebecca Mack, a spokeswoman for ESS said the company is drafting a letter to the editor of the newspaper.
"The CEO is very, very, incensed about the story," she said.
Yet, C.E. Unterberg, Towbin analyst Kalpesh Kapadia told Reuters he downgraded the stock last month because of similar issues.
"I think most of the things talked about in the article are on the money, Kapadia said. "But they are kind of already out there."
He said market leaders, such as ESS and Zoran, have said the average selling price had been eroding at about 10 percent to 15 percent a year, 16 percent at the highest.
He believes the rate of price erosion will accelerate to 25 percent to 30 percent in the second half of the year. Kapadia said the stock could fall even lower.
"We would also like to point out that the last time when there was a brief period of 'over inventory; in the DVD space in December 2000, both ESS and Zoran traded close to their book value," Kapadia wrote in a research note. "Additionally, this time around the end market for DVD players is more mature and there is more competition at the chip level. |
