Phoenix Tech Slips; Roth Downgrades

Phoenix Technologies (PTEC) shares are losing ground this morning after Roth Capital analyst Nathan Scheiderman cut his rating on the stock to Hold from Buy, while maintaining his price target of $4.50. The stock closed yesterday at $4.07. Schneiderman notes that PTEC has rallied more than 40% since reporting earnings in July.

Schneiderman point out that PTEC this week announced that it will bundle its HyperSpace instant on software with Intel (INTC) Atom processor motherboards; while good news, Schneiderman says he is concerned that the company’s new product revenue seems overly dependent on converting customers from free trials into paying subscribers. “We worry that conversion rates could disappoint and notes that revenue flow from these conversions would hit the income statement with a lag,” he writes in a research note.

Meanwhile, while he concedes that notebook shipment data has been more encouraging of late, he is concerned that demand for higher-end notebooks may remain soft, as consumers shift to cheaper models. He notes that ASPs for the core system software the company provides are “far lower” for netbooks than for high-end notebooks.

Schneiderman trimmed his 2010 EPS forecast to break-even from a profit of 3 cents.

PTEC today is down 19 cents, or 4.7%, to $3.88.