Circuit Board Maker’s Dive Takes Stock in Anaheim’s DDi Down Too
Shares of Anaheim circuit board maker DDi Corp. retreated Tuesday, part of an industry free fall after an Oregon competitor, Merix Corp., warned of sluggish sales.
DDi’s stock fell $3.75 a share, or 13%, to $24.75. Merix’ shares, however, lost more than half of their value.
Merix faces declining demand from customers in the telecommunications and computer industries, analyst Eric Gomberg of Thomas Weisel Partners said. “Some of their customers are working out inventory issues,” he said. Gomberg cut his rating on Merix to “buy” from “strong buy.”
Merix shares dropped by $12.81 to $12.31 in trading of 6.8 million, about 14 times the three-month daily average. The stock had the fourth-biggest percentage decline in U.S. markets.
Intel Corp., Lucent Technologies Inc., Motorola Inc. and other Merix customers have reduced their sales targets in recent weeks. Several customers have canceled or postponed orders, said Merix, which is based in Forest Grove, Ore.
In addition to DDi, other rivals’ stock declined. “Merix is taking down a number of its peers, some of whom are more likely to have issues than others,” Gomberg said.
Indeed, DDi reiterated Tuesday that it remains “very comfortable” with estimates for the fourth quarter and for fiscal 2001, citing “robust” market demand for its printed circuit boards.
A First Call/Thomson survey of seven analysts produced a mean earnings estimate of 38 cents a share for the fourth quarter, $1.01 a share for the year, and $1.47 a share for 2001.
Analysts also said Merix is merely an indirect competitor whose problems won’t spread to DDi.
“Merix’s printed circuit boards are mainly used in the high-volume market, whereas DDi produces for the early-stage, low-volume market,” said analyst Michael A. Schneider of Robert W. Baird & Co.
Herve Francois, analyst with Credit Suisse First Boston Corp., said DDi is not seeing the order cancellations that Merix is seeing.
San Jose-based Sanmina Corp. fell $6.13 to $66. Shares of Park Electrochemical Corp., a maker of materials used to build circuit boards, plunged $14.63, or 41%, to $20.75 on concern that sales will fall short of estimates. The Lake Success, N.Y., company will report third-quarter results before the stock market opens today.
“It’s down because Merix disappointed,” said John McManus, an analyst at Needham & Co. who has a “strong buy” rating on Park Electrochemical. “I believe it is completely unfounded, and we continue to buy it.”
Circuit boards account for only 20% of Sanmina’s sales, and the company is being unfairly hurt by its association with Merix, analyst Keith Dunne of Robertson Stephens said.
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Dow Jones Newswires and Bloomberg News were used in compiling this report.
