) to neutral from buy.
Analyst Tim Long says his downgrade follows another miss driven by weakness in China, and revenue recognition issues. He says he would like to see the company convert sales growth into earnings per share before becoming positive.
He cuts 81 cents 2004 earnings per share estimate to 37 cents, $1.70 2005 earnings per share estimate to 70 cents, and $2.20 2006 earnings per share to 76 cents, to reflect weak sales growth and gross margins.
Long notes that for the eighth quarter in a row, gross margins were soft. He believes the recent acquisition of Audiovox brings risk to gross margin for the next year, a key metric he will look at to get more constructive. He cuts his $25 target to $14.