Cypress Semiconductor Corp. (NASDAQ: CY) may be getting the chip sector off to yet another bad start for earnings season. The company said that business eroded in the final two weeks of December in its distribution channels. It also said that this was weakness from customers across all geographies and end markets, with purchases coming in slower than previously expected.

There does not appear to be any one smoking gun. That is why this is troubling for the chip sector as a whole. The company is trying to signal that orders have stabilized and that it believes the first quarter will be the bottom. Here is the quote:

All divisions will decline sequentially from Q3 and were weaker than originally expected. We have seen customer backlog stabilize over the last two weeks and we believe that Q1 will be the bottom for revenue and bookings. However, the macro environment remains very fluid with lead-times near historical lows. This continues to impact the visibility for our distribution partners and us.

Preliminary fourth-quarter guidance, including the Ramtron purchase, is for revenue of $177 million to $179 million, and it sees its non-GAAP earnings per share of $0.03 to $0.04. This is less than the prior forecast due to “lower revenue and lower gross margins due to product mix, lower manufacturing absorption and inventory related charges.” Thomson Reuters had estimates of $0.14 per share and $193.5 million in revenue.

This is not just a small miss. Cypress feeds chips into many sectors, and that is why we are concerned even if this is only a $1.5 billion market capitalization company. It sells to automotive and transport players, as well as companies in consumer electronics, computers and peripherals, communication and telecom, industrial, home appliances, lighting and power control, medical, security, video and imaging, and the wireless segments.

Shares are down more than 6% at $10.36 in the premarket trading session, and the 52-week trading range is $8.70 to $19.25.

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