Why Silicon Image Shares Plunged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Silicon Image have plunged today by as much as 15% after the company reduced its fourth quarter outlook.

So what: Silicon Image said fourth quarter sales are now expected to be in the range of $59 million to $60 million, which is short of its previous revenue guidance of $64 million to $67 million. The company cited order rescheduling at a larger customer, along with changes in production schedules, as the primary causes for the reduction.

Now what: The company also said it was taking an inventory writedown charge, as some inventory cannot be sold due to defects in the material used by one of its vendors in packaging. Silicon Image is working to recover the value of the writedown from the vendor, but in the meantime the charge totals $6.3 million that will be included in cost of goods sold. That charge will hurt earnings by roughly $0.08 per share this quarter.

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The article Why Silicon Image Shares Plunged originally appeared on Fool.com.

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