Diamond Multimedia Dn -2:Analysts Saw 2Q Pressures-Analyst
By Charlene Oldham
NEW YORK (Dow Jones)--Shares of Diamond Multimedia Systems Inc. (DIMD) suffered recently from the overblown first-quarter earnings expectations of some hedge fund managers, said one analyst.
Shares were recently trading at 12 3/4, down 1 7/8, or 12.8%, on volume of 6.6 million compared with an average daily volume of 1 million.
"There was probably a disconnect between what was expected on the analysts' side and the side of the big-money hedge funds," said Lenny Brecken, an analyst at CIBC Oppenheimer Corp.
Diamond Multimedia Systems earned 22 cents a diluted share on sales of $186 million in the first quarter, compared with a loss of 17 cents on sales of $112 million a year ago.
Those numbers handily beat First Call Corp.'s consensus view of 19 cents a share, but fell short of some whisper numbers, Brecken said.
Some Wall Streeters expected sales as high as $200 million, he said, adding that those numbers were unrealistic.
Brecken, who carries a buy rating on the stock, expects the San Jose, Calif., concern to continue beating analysts' expectations, even though the company predicted some pricing pressures in the second quarter.
Diamond Multimedia Systems said it expects some pricing pressures related to new product introductions.
The company will have to clear out small inventories of its older 3-D mother board to make room for the new model, Brecken explained, adding the effect was expected and has been factored into analysts' earnings models.
Brecken estimates the company will earn 19 cents a share in the second quarter and 82 cents for the year. First Call's estimate puts second-quarter earnings at 12 cents and year-end earnings at 70 cents a share.
Diamond Multimedia Systems lost $1.29 a share in the second quarter of last year.
"Dow Jones News Service"
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