GeiserCorp

Texas Instruments (TXN) and STMicroelectronics (STM) reported a fall in earnings yesterday as the weakening economy continues to weigh on demand for chips. TI's Q3 results were better than expected but below the seasonal average, and EPS slumped to $0.51 from $0.71 and revenue slipped 7.3% to $3.47B. TI predicted a gloomy Q4, with weakness in almost every major market segment, although chips for smartphones remain a bright spot. STMicroelectronics' (STM) Q3 EPS fell to $0.09 from $0.23 as revenue slipped 8.1% to $2.44B, while it also warned that Q4 sales would fall short of analyst estimates.

On Our Radar

Netflix (NFLX) shares plummeted 38% premarket as a profit warning and worse-than-expected subscriber losses overshadowed Q3 earnings that topped forecasts. Although EPS rose to $1.16 from $0.70 and revenue climbed 49% to nearly $822M, Netflix lost 800K customers compared with a projection of 600K, and warned that additional losses in subscribers would continue. It also forecast Q4 results well below Street estimates and quarterly losses next year due to its entry into the U.K. and Ireland.

Not a pretty story, and not the time to be on the long side. Pandora (P), an internet radio outfit with similar business model may be next. Pandora has done well over the past month with its stock price increasing by about 40%. When looking at how much Sirius has struggled over the years, it is hard to imagine that Pandora can ever post consistent positive earnings. Pandora has plenty of substitutes out there including Grooveshark, 8tracks, and fratmusic.com. Pandora's earnings have been dropping recently instead of increasing, and this may just be a company at one bad earnings report away from dropping 50%. Just beware.