NEW YORK (AP) — Shares of mobile gyroscope maker InvenSense sank Wednesday after the company forecast disappointing results for the third quarter.
THE SPARK: InvenSense Inc. makes chips that allow people to play smartphone and tablet games that react to motion, such as games that turn devices into midair steering wheels. The company said Tuesday that it expects to report adjusted net income of 16 to 18 cents per share and $65 million to $68 million in revenue in the current quarter.
Analysts were calling for net income of 22 cents per share and $76.6 million in revenue, on average.
THE BIG PICTURE: The San Jose, Calif., company reported its fiscal second-quarter results after the market closed Tuesday. InvenSense said its net income was 15 cents per share, or 21 cents per share when one-time costs were excluded. Revenue rose 28 percent to $70.9 million.
Analysts expected net income of 19 cents per share and $69.2 million in revenue, according to FactSet. The company's fiscal third quarter ended on Sept. 29.
On Monday, the company's shares fell after an analyst said the company's products have not been included in designs for the new iPad Mini with Retina display or iPad Air. Maxim Group analyst Ashok Kumar said that both models, which go on sale in November, use Apple's A7 motion co-processor instead. InvenSense declined to comment on the report, while Apple did not respond to a request for comment.
Earlier this month InvenSense agreed to buy Analog Devices Inc.'s microphone business for $100 million. InvenSense said the deal will expand its audio business and complement some of its products for mobile, gaming and wearable device customers. The deal is not included in InvenSense's guidance because the company doesn't expect it to have much effect on its results in the current fiscal year.
THE ANALYSIS: Pacific Crest Securities analyst John Vinh said the company's third-quarter guidance fell short of Wall Street expectations because of weakness in the gaming and tablet market, and lower sales to Samsung Electronics. Vinh said the company's results have been "sloppy," but it could still report strong growth in the current fiscal year and may still pick up Apple as a customer.
He rates InvenSense shares "Outperform" with a price target of $19.
SHARE ACTION: Shares of InvenSense lost $2.02, or 10.9 percent, to $16.60 in afternoon trading, after dropping as low as $15.20 earlier in the session. The stock remains up about 78 percent since the company posted its fiscal fourth-quarter results on May 2.