* Q1 revenue pre-announcement again disappoints investors with management blaming weak sales of ATV chips in Europe and China; gross margins are also weaker than expected due to inventory reserves and poor new product yields.
* We will be watching closely for signs that the company is gaining traction with new design wins at key customers this year with new products introduced at CES in order to give us confidence that the firm can return to more normalized execution in 2007.
* We are maintaining our BUY rating on PXLW for now, given our belief that the stock has a compelling risk/reward profile for longer-term value investors, and given our belief that the stock remains an attractive takeover target in light of the company's competitive product roadmap.
* Reducing 2006 EPS estimate from ($0.16) to ($0.35) and 2007 EPS estimate from ($0.03) to ($0.20) on reduction in revenue forecast; we continue to view PXLW as a potential acquisition target trading at deep value levels.
PXLW 1-yr chart: