Dense-Pac Stock Plunges 30.3%

Shares of Dense-Pac Microsystems Inc. tumbled Wednesday after the Garden Grove builder of high-powered computer memory systems said its second-quarter results will be hurt by a shortage of some types of chips.

The stock fell 30.3%, the third largest percentage loss in U.S. markets Wednesday, and has fallen 59% from its peak on July 21. Dense-Pac shares closed at $6.63, down $2.88, in Nasdaq trading.

The company builds condensed, high-power memory for computers by linking semiconductors. A surge in demand for faster computers has led to a scarcity of direct random access memory chips, or DRAMs, leaving the company with fewer semiconductors to refashion for clients, said Dense-Pac Chief Executive Ted Bruce.

“It will affect both earnings and revenue,” Bruce said.

The shortage is lowering the company’s short-term sales potential and means Dense-Pac won’t meet quarterly earnings expectations of the only analyst who tracks it. The analyst, Eric Gomberg of Thomas Weisel Partners, estimated that the company would post earnings of 7 cents a share for the three months ending Aug. 31.

Bruce declined to say by how much Dense-Pac’s earnings will trail the analyst’s estimate, but said he expects it will take up to five months for chip makers to increase the supply of DRAMs and fuel demand for Dense-Pac’s service. He said he remains optimistic about the company’s long-term prospects.

In the second quarter last year, Dense-Pac earned $680,000, or 3 cents a share, on sales of $7.4 million.

Dense-Pac’s technology expands the memory of computers and electronic systems without increasing their size. The company’s major customers include TRW Inc., ITT Corp., Texas Instruments Inc., and Motorola Inc.

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Taking Its Lumps

Investors pummeled Dense-Pac Microsystems stock after the Garden Grove company warned that a shortage of some memory chips may hurt business. Daily prices:

Wednesday’s close: $6.63

Source: Bloomberg News