Why Diodes' Shares Plunged

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What: Shares of diode maker Diodes Incorporated (NAS: DIOD) have plunged today by as much as 11% after the company reported first-quarter earnings.

So what: Revenue fell 10.5% to $144.7 million, with non-GAAP adjusted net income of $4.1 million, or $0.09 per share. Those results were mostly what investors expected. Gross margin plunged from 35.5% a year ago to just 23.3% this quarter, as the company cleared out lower-margin inventory.

Now what: CEO Dr. Keh-Shew Lu said the company saw signs of recovery after the Chinese New Year, which helped Diodes move inventory although pricing pressures and lower utilization hurt margins. The company believes that the second quarter will improve, with revenue expected between $155 million and $164 million, which is better than the $155.5 million consensus estimate. Lu said the company has started adding capacity for new, more advanced packaging at its Shanghai facilities to help boost future growth.

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At the time thisarticle was published Fool contributorEvan Niuholds no position in any company mentioned.Click hereto see his holdings and a short bio. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.

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