4 May 2012

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

For its fiscal second-quarter 2012 (to end-March), 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 $364.7m, down 29% on $393.7m last quarter but up 12% on $325.4m a year ago (and exceeding guidance of $360m), despite March-quarter seasonality.

The three 10% customers were Foxconn, Samsung and Nokia. Of total revenue, 65% came from mobile wireless products and 35% came from linear high-performance analog (HPA) products. Of mobile wireless revenue, 25% came from 2G and 75% from 3G (EDGE, WCDMA).

“Skyworks continues to outperform our addressable markets through diversification, content growth and market share gains,” says president & CEO David J. Aldrich. “At the highest level, we’re capitalizing on the mobile Internet and demand for ubiquitous connectivity by solving our customers’ size, performance, complexity and battery life challenges,” he adds. “Skyworks is at the heart of the world’s most popular smartphones, tablets, ultrabooks and e-readers as well as within the supporting network infrastructure.” During the quarter, Skyworks released a family of LTE SkyHi front-end modules with what is claimed to be record power efficiency (entering high-volume production in support of several major platform launches for 2012); started volume shipments of custom camera flash drivers for multiple smartphone ramps at Samsung and other OEMs; and supported Delphi with automotive satellite radio receiver ICs.

However, on a non-GAAP basis, gross margin has fallen from 44.3% last quarter to 43.2%, down on 43.9% a year ago. Operating expenses have risen from $69.3m last quarter to $73.7m, mostly through a rise in R&D expenses to $45.4m. Net income has fallen from $96.2m last quarter to $79.8m, although this is better than guidance and up on $78.7m a year ago.

Cash flow from operations was $117m (up from $77m last quarter - since the beginning of fiscal 2011, Skyworks has generated a cumulative $560m). Capital expenditure was $26m and depreciation was $18m. “We expect capital expenditures to remain above depreciation levels through the remainder of fiscal 2012 as we increase capacity across all of our facilities in preparation for second-half product ramps,” says VP & chief financial officer Donald W. Palette. “These CapEx investments consist of equipment add-ons within our existing facilities, which have a very quick payback. That expands our product margins and our return on invested capital,” he adds.

However, during the quarter cash and cash equivalents fell from $446.5m to $307.3m. The firm completed strategic all-cash acquisitions, including of Advanced Analogic Technologies Inc (AATI) of Santa Clara, CA for about $200m in net cash, significantly expanding Skyworks’ addressable markets. “We retired the remainder of our convertible debt in favorable terms and without any equity dilution. That makes us debt-free for the first time in Skyworks' history,” notes Palette. The firm also repurchased 3.5 million shares of its common stock at an average price in the low $20 range.

“Results demonstrate how our diversification strategy, our flexible business model and ongoing focus on operational execution contributed to healthy financial returns in the seasonal trough, but more importantly, positioned us to outperform through the remainder of the year,” says Aldrich.

During the quarter, Skyworks launched GPS solutions enabling navigation functionality in smartphones, tablets and ultrabooks for a second-half 2012 ramp; launched 802.11ac wireless networking solutions with the industry’s leading chipset provider; secured RF subsystem design wins at Alcatel-Lucent, Ericsson, Huawei, Nokia Siemens and ZTE for 4G network infrastructure upgrades; and captured new design wins in the high-performance analog business across diverse applications (including connectivity sockets in the next-generation, high-end Sony PlayStation gaming platform, custom switch modules in a military avionics applications for ITT systems, a 16-channel backlighting controller for high-definition LED TVs for LG and others, a next-generation leadless implantable defibrillators with the firm’s portfolio of optocouplers, and remote gas meter reading solutions with Aclara). “We see our momentum strengthening in the current June quarter and accelerating in the September quarter based on strong first-half design win activity and a robust opportunity pipeline,” says Aldrich.

For fiscal third-quarter 2012, Skyworks expects revenue to grow 5% to $383m, driving increases in gross margin to 43.5% and operating expenses to $76m, as well as an increase in earnings per share. “We expect both top and bottom line sequential growth in the current quarter, driven by LTE and smartphone program ramps as well as increasing traction in adjacent high-performance analog applications,” says Palette.

“During 2012, LTE devices will hit critical mass,” says Aldrich. A recent forecast by Strategy Analytics suggests that LTE shipments could grow by nearly ten-fold in 2012. “As demand for global roaming expands, smartphones and tablets that incorporate only one or two regional LTE bands will begin to adopt additional LTE frequency, along with full backward compatibility to 3G and to 2G,” he adds. “Also during 2012, smartphone adoption will skyrocket in developing countries.” According to recent market research, smartphone growth in China and India could nearly double this year and approach 200 million units. “The embedded base of 2G subscribers is tremendous, creating a massive upgrade cycle that will play out over the next few years,” Aldrich concludes.

“Looking ahead, we do see gross margins continue to improve as revenue growth accelerates through the remainder of the year and as we realize synergies associated with our recent acquisitions,” concludes Palette.

See related items:

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

Skyworks’ revenue exceeds guidance, up 37% year-on-year

Tags: Skyworks

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