19 July 2012

Skyworks’ revenue and profit rebound more than expected from last quarter

For its fiscal third-quarter 2012 (ending 29 June), Skyworks Solutions Inc of Woburn, MA, USA (which manufactures linear products, power amplifiers, front-end modules and radio solutions for handset and infrastructure equipment) has reported revenue of $389m - again, split 65:35 between mobile wireless business and linear high-performance analog (HPA) business. Following a sharp drop of 29% to $364.7m last quarter, revenue is up 6.7% on that and up 9.2% on $356.1m a year ago, as well as exceeding guidance of $383m.

The 10% customers were Foxconn and Samsung, but Nokia has fallen to “high single digits”. The mix of mobile wireless business was roughly 20% 2G and 80% EDGE/WCDMA (compared with 25:75 last quarter), as 2G continues to decline.

“Globally, consumer appetite for smartphones, for tablets, data cards and an array of other mobile Internet devices remains high, driven by the boom in social networking and driven by an accelerating shift towards cloud-based content, by mobile computing displacing traditional PCs, and the growing popularity of photo-sharing applications like Flickr, Instagram and Picasa, and the explosion in video conferencing and streaming video,” says president & CEO David J. Aldrich. “These global themes are in the early stages of adoption and should provide a tailwind for our business for years to come,” he adds.

“Skyworks outperformed our addressable markets,” says Aldrich. During the quarter, the firm started volume production of wireless networking solutions in support of Broadcom’s 802.11ac platforms, and ramped nine connectivity devices within a recently introduced ultra-thin notebook.

On a non-GAAP basis, gross margin remained the same as last quarter, at 43.2% (down on 44.9% a year ago). Operating expenses have risen again, from $73.7m last quarter to $76.3m, mainly due to R&D expenses rising from $45.4m to $48.6m. Nevertheless operating income was $91.7m (operating margin of 23.6%), up on $83.9m last quarter (23% margin) but still down on $97.6m a year ago (27.4% margin). Likewise, although still down on $93m a year ago ($0.49 per diluted share), net income has rebounded from the low of $79.8m ($0.42 per diluted share) last quarter to $86.1m ($0.45 per diluted share, $0.01 better than guidance).

Cash flow generated from operations was $44m (bringing the year-to-date total to $244m). Capital expenditure has risen from last quarter’s $26m to $31m due to continuing capacity expansion across all facilities to support second-half product ramps. “These CapEx investments consist of equipment add-ons within our existing facilities, which have a very quick payback,” notes VP & chief financial officer Donald W. Palette. “That expands our product margins and our return on invested capital,” he adds. During the quarter, cash and cash equivalents rebounded from $307.3m to $327.9m.

“Our strategic diversification across OEMs and chipset partners [into new adjacent analog products and in complementary vertical markets] is enabling us to produce consistently strong operating results despite the macro economy,” says Aldrich. “Specifically, we are gaining share within adjacent vertical markets including automotive, medical, avionics, military, location services and broadband communications. At the same time, our innovative solutions are powering the world’s most popular smartphones, tablets, home automation platforms and network infrastructure systems,” he adds. “In short, we have created a differentiated business model that is delivering demonstrable, best-in-class mobile internet growth with analog semiconductor shareholder returns.”

During the quarter, Skyworks unveiled SkyOne (a front-end system for mobile platforms integrating all RF and analog content between the transceiver and antenna into a single, compact device); expanded its portfolio of ultra-low-noise amplifiers for smart energy, public safety radio, cellular infrastructure and other ISM-band applications; and introduced high-power linear control ICs for TD-LTE base stations, repeaters and low-frequency military/microwave UHF and UVF radios.

The firm also deployed analog solutions for low-noise receivers being used in automotive toll-tag transponder systems; captured a receiver protection design win with Medtronic for heart monitor applications; and secured initial power management design wins at three new OEM customers with a suite of LED drivers.

“Based on new program ramps and the depth of our product pipeline, we expect to outpace market growth in the second half of 2012,” says Palette. For fiscal fourth-quarter, Skyworks expects revenue to rise another 7% to a record $415-420m. Gross margin should be 43-43.5%. Operating expenses are expected to rise only slightly to about $77m, yielding operating margin of 25%. Diluted earnings per share should rise more than 10% sequentially to $0.50-0.51.

“We see gross margins continuing to improve as we realize synergies associated with our recent acquisitions and as we capture the margin benefits of some of our recent capital investments,” says Palette. Target operating margin is 30%, which the firm expects to approach again as it continues to gain market share and grow its top line (through getting its acquisitions up to scale).

See related items:

Skyworks’ revenue falls 29% quarter-to-quarter, but up 12% on a year ago

Skyworks’ 17% year-on-year revenue growth beats guidance

Skyworks grows quarterly revenue more-than-expected 13% to $402.3m

Skyworks quarterly revenue up 27% year-on-year to $356.1m, beating guidance

Tags: Skyworks

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