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Gadget producers under shrinkage

 Fears that the recession-hit U.S. consumers will decrease the third-quarter earnings for makers of MP3 players, cell phones and other gadgets, pummeled the stocks of consumer electronics companies like Apple Inc and SanDisk Corp on Tuesday, a day after they issued grim forecasts. This is relatively normal in a tightening economy, where the consumers give up first to the luxury and the technology goods when their revenues get tighter.

Apple gave a lower-than-expected third-quarter outlook on Monday, but said wider economic woes have not directly affected its results. Still, Apple shares fell 2.6 percent to $162.02 on Nasdaq on Tuesday as several analysts cut their price targets on the stock. The stock fell as low as $146.53 during trading.

SanDisk, which makes flash memory for digital cameras and other devices, posted a second-quarter loss and lowered its revenue forecast on Monday, sending its shares down 24 percent to $13.62 Tuesday on Nasdaq.

On Monday, SanDisk Chief Executive Eli Harari blamed the poor results on “the rapid deterioration in consumer confidence,” which hurt sales to U.S. retail customers and cell-phone makers.

Analog chip maker Texas Instruments Inc (TXN.N: Quote, Profile, Research, Stock Buzz) also cut its revenue forecast on Monday, citing slowing demand for its products, which are integral components of gadgets like mobile phones.

Global Crown Capital analyst David Wu said that with TI’s distributors apparently seeing normal sales to their customers, its weaker-than-expected outlook did not give any new insight into demand for consumer electronics.

But Wu said the back-to-school and year-end holiday shopping seasons — typically strong sales months for consumer companies — could see weakness in the United States due to high gasoline prices and consumer jitters about the economy.

“Consumer electronics is probably going to be tough in the U.S., but there’s a big world out there,” Wu said.

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