Israeli mobile chip designer Ceva Inc cut its 2012 earnings and revenues estimates due to weaker-than-expected sales at key customer Nokia , sending its shares tumbling to a year low on Wednesday.
Chief executive Gideon Wertheizer said Ceva's previous outlook assumed continued royalty growth for its chips in Nokia's 2G phones and a ramp up of chips in 3G phones as Ceva's replace those of Texas Instruments in the second half.
Nokia posted a 24 percent drop in first-quarter phone sales.
Ceva said it now expected 2012 revenue of $57.2-$61.2 million and earnings per share excluding one-off items of 87 to 99 cents, below prior estimates of $62-$66.5 million in revenue and EPS of $1.02 to $1.06.
"We decided to take a prudent approach and reduce the revenue contribution from Nokia both in the 2G and to a larger extent in the 3G space for this year," he told analysts on a conference call.
Ceva's Nasdaq-listed shares were down 13.6 percent at $19.50 in early trade.
Companies such as Intel, Broadcom, Spreadtrum and ST Ericsson license Ceva's technology to build chips known as digital signal processors (DSP).
Wertheizer said that outside of Nokia's woes, Ceva had solid growth prospects as Taiwan handset maker HTC was moving to Ceva's chips, while five of the nine new handsets from China's Huawei Technologies, the world's No.2 telecom equipment maker, will use Ceva chips.
Ceva also expects to benefit from growth in 4G technology that offers very fast data transfer rates.
It expects to continue taking market share from Texas Instruments and Qualcomm as well, due to growth of 3G in India and China.
"We believe we are capable of powering 1.7 billion Ceva-based devices in three year's time compared with 1 billion in 2011," Wertheizer said, citing strong growth in China and India.
Ceva posted higher first-quarter profit that beat expectations as the company awarded new licenses for use of its chips in smartphones.
Ceva reported quarterly earnings per share excluding one-off items of 24 cents a share, compared with 23 cents a year earlier. Revenue was unchanged at $15.1 million.
The company was forecast to earn 22 cents a share on revenue of $14.8 million, according to Thomson Reuters I/B/E/S.
Ceva itself forecast in January first-quarter EPS of 20-22 cents on revenue of $14.2 million to $15.2 million, citing a temporary slowdown in cellphone sales for the relatively weak outlook.
"Driven by strong licensing activities, we generated revenue and earnings results at the high-end of our expectations," Wertheizer said.
Ceva had been benefiting from rising sales of smartphones such as the Samsung Galaxy S2 and the Droid Charge, which use its technology through suppliers such as Intel and ST Ericsson.
Wertheizer said the company has new licensees who will use its DSP cores for advanced audio processing in smartphones.
For the second quarter, Ceva forecast revenue of $13-$14 million and EPS excluding one-offs of 15 to 17 cents. Analysts had projected revenue of $14.6 million and EPS of 22 cents. (Editing by Mark Potter)