Xbox-Related Stocks Drop After Cirrus Warning

Cirrus shares fell 29 cents, or 4.4 percent, to $6.25 late on Wednesday morning on Nasdaq, after the company warned Tuesday night that revenue this quarter would be as much as 16 percent below guidance because of lower-than-expected sales to Thomson Multimedia . Cirrus sells its controller chips to Thomson, which builds them into the console's DVD drive. Thomson denied production was down, saying in a statement that its orders have exceeded volume commitments in the first half of the year and it expects to fulfill all future orders as well. Thomson called Cirrus' assertions about the shortfall "incorrect." Other shares falling after the news were Nvidia Corp. , which makes graphics chips for the Xbox, down 6.4 percent at $19.82; Flextronics International Ltd , which builds the Xbox, down 7.4 percent at $8.01; and Solectron Corp , which provides Xbox repair services, down 5 percent at $5.08. Less affected by the news were Texas Instruments Inc., which makes USB parts for the Xbox, down 18 cents or less than 1 percent at $23.25; Western Digital Corp., which makes Xbox hard drives, down about 1.8 percent at $3.34; and Intel Corp., which makes the Xbox motherboard, down 2 percent at $17.95. Microsoft shares were largely unaffected, down about 1.6 percent at $52.10. Credit Suisse First Boston said in a note on Wednesday it did not think the Cirrus warning had any implication for Xbox sales, saying the shortfall probably came before Microsoft cut its sales estimates for the console in April. But Thomas Weisel Partners analyst Eric Gomberg was more downbeat on the implications for Cirrus. "In our opinion, given the magnitude of the shortfall, and the fact that Cirrus had already guided that Xbox-related revenues would decline sequentially in (the first quarter), it appears that Xbox related production has been virtually nonexistent in the past four weeks," he said.