C-Cube Shares Fall on 2nd-Quarter Forecast

C-Cube Microsystems Inc. shares fell 22% after the video-chip maker forecast disappointing earnings and declining sales in China, a sign that it’s losing business to competitors. C-Cube shares fell $5.625 to $19.875 in Nasdaq trading. It was the fourth-most active U.S. stock. Earlier, shares touched a 19-month low of $19.375. C-Cube shares have lost almost half their value this year as demand flagged for chips used in VideoCD players, which decode data on compact discs to create digital images. The superior digital video disc, or DVD, format, introduced in the U.S. earlier this year, hasn’t been able to take up the slack, analysts said. Milpitas-based C-Cube said it expects second-quarter profit of 20 cents to 25 cents a share, well below the 40-cent average estimate of analysts. Revenue for the quarter ending June 30 will be $70 million to $75 million, compared with $73 million a year earlier, and down from $94 million in the first quarter. C-Cube said revenue will be lower than expected because of falling prices, mounting competition and a seasonal slowdown following the Chinese New Year in February. The company also said some of its customers had trouble designing products around a new, less expensive version of the decoder chip. In the meantime, the market for DVD chips is developing more slowly than expected and C-Cube has lost key executives, including its chief financial officer, Jim Burke, who quit in March. The VideoCD technology, which isn’t marketed in the U.S., provides lower-quality images and shorter playing times than DVD.