Microsemi Shares Swoon On Barclays Downgrade

Microsemi (MSCC) shares are down sharply this morning after Barclays Capital analyst Romit Shah cut his rating on the shares to Equal Weight from Overweight, while trimming his price target to $12, from $10.

Shah writes that the chip maker’s business model has remained intact during the economic downturn, but that recent weakness in the commercial aerospace communications market and a lawsuit by the Department of Justice could pressure estimates and the stock’s multiple. Shah writes that he’s surprise the stock wasn’t hit yesterday on news of production cutbacks at Boeing (BA), one of Microsemi’s largest customers, accounting for more than 20% of sales.

The lawsuit Shah refers to is a December 2008 suit alleging that through its acquisition of Semicoa, the company has reduced competition in small signal transistors used in military and space programs. Shah believe the suit could set a precedent for aditional complaints, or limit the company’s pricing power, and notes that defense accounts for 37% of the company’s sales.

Shah cut his 2009 EPS forecat to 41 cents, from 44 cents; for 2010 he goes to 54 cents, from 66 cents.

MSCC today is down 95 cents, or 7.7%, to $11.45.