Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Cypress Semiconductor plunged by nearly 16% during Tuesday's intraday trading after the company lowered its third-quarter 2013 guidance.

So what: For the quarter, Cypress now expects revenue of $184 million to $187 million, which should translate to adjusted earnings per diluted share of $0.10 to $0.12. Previously, the company had told investors to expect revenue in the range of $201 million to $207 million and non-GAAP earnings per share of $0.17 to $0.18. For reference, analysts on average were expecting adjusted earnings of $0.17 per share on sales of $204.7 million.


Now what: Cypress CEO Brad Buss stated, "We are seeing greater than expected weakness in our mobile handset revenues, mainly within Asia, due to a customer push out of certain new handset programs to Q1, as well as order reductions at various end customers in China to balance inventory levels." 

Worse yet, Buss added to the uncertainty by elaborating, "Greater than 70% of our revenue traditionally has come from distributors and the final week of September is our largest week of the quarter, and, as such, our revised revenue estimates could vary significantly."

As it stands, and considering Cypress is still losing money on a GAAP basis, it's hard to blame investors for running for the exits. Until Cypress can prove it has what it takes to achieve sustained, predictable profitability over the long term, it seems a wise decision to stay on the sidelines.

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The article Why Cypress Semiconductor Shares Dropped originally appeared on Fool.com.

Fool contributor Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Cypress Semiconductor . Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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