International Rectifier Corp. shares plunged as much as 22 percent on Friday, after management revealed that its much-touted plan to reach 50 percent gross margin numbers had been completely derailed. The company also delivered earnings in line with sharply reduced third quarter estimates.

Shares of El Segundo-based International Rectifier fell 18.2 percent to close at $27.86, after falling as low as $26.62 earlier Friday. "Investors did not expect the kind of news management detailed this week," said Craig Berger, semiconductor analyst with L.A.-based Wedbush Morgan Securities. He downgraded the stock to a "hold," one of six downgrades issued on Friday.

Earlier, the company reported net income of $26.2 million (36 cents per share) for the quarter ended Sept. 30, compared to net income of $37.6 million (53 cents per share) a year earlier. Revenues fell to $272.6 million from $312 million one year earlier.

Wall Street was expecting an earnings disappointment, so Friday's yard sale was caused by something else Chief Executive Alex Lidow revealed on the conference call: that gross margins would fall to somewhere around 38 or 39 percent for the fourth quarter.

"The only thing that was really new was the fact that gross margins are coming in a lot worse than people expected," Berger said.

Company management had been promising to improve its gross margin percentage to 50 percent by June of 2006, up from margins in the low 40-percent-range.

When the company reported gross margins of 44.5 percent for the quarter ended March 31, "Everyone said, 'OK, they're getting close,'" Berger said. The company's June-quarter gross margin figures declined slightly, but management assured investors that its plan to reach 50 percent was still on track. At the time, the stock was trading for around $50 a share.

On Oct. 11, the company warned that late customer orders and "a product mix that was not what we expected" would reduce gross margins by 3 percent, but did not elaborate, Berger said.

Then on Thursday's post-earnings conference call, the company revealed that gross margins would slip further, to 38 or 39 percent prompting the latest sell-off and said it wouldn't hit its goal of 50 percent margins for as much as another year.

"Nobody wants to stick around and wait nine months to see if these guys can actually do what they say," Berger said.

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