Cypress Semiconductor Corporation
(
CY
) has reported second-quarter 2012 earnings of 5 cents per share,
beating the Zacks Consensus Estimate of 3 cents. The adjusted
earnings per share exclude one-time items, but include stock-based
compensation expense. The higher touch sales, improved gross
margins and tight operating expense control contributed to the
upside in earnings.
Revenue
Cypress reported revenue of $201.3 million, up 8.8% sequentially,
down 21.1% year over year, and was on the lower end of the
management's guidance range of $200-$207 million. However, the
sequential increase was attributable to strength in all revenue
segments, particularly Programmable Systems, which grew 18%.
In the reported quarter, the book-to-bill ratio was 0.87, down from
1.33 in the first quarter due to a weak global macroeconomic
environment as well as short lead times.
Revenue by Segment
Starting from the first quarter of 2012, Cypress has realigned its
revenue in four business segments - Programmable Systems Division
(PSD), Memory Products Division (MPD), Data Communication Division
(DCD) and Emerging Technology Division (ETD).
The PSD segment, which generated 47.8% of second quarter revenue,
consists of two divisions. The first is basically the old Consumer
and Computation Division (CCD) segment, which has the TrueTouch,
CapSense, Trackpads and Ovation businesses under its umbrella.
The second division comprises the core PSoC business. The
segment increased 18.0% sequentially to $96.1 million driven by
increase in TrueTouch sales which were up 21% sequentially on
increased market share for TSG4 product.
The MPD segment generated 41.2% of revenue, up 1.3% sequentially
due to strong demand in static random access memory (SRAM)
business. This existing division will continue to focus on four
SRAM business units, general-purpose programmable clocks and
process technology licensing.
The DCD segment generated 10.1% of revenue, which was up 2.0%
sequentially on increases in USB products led by 3.0, partially
offset by a decline in West Bridge. This division has been
realigned to focus solely on USB controllers, WirelessUSB and West
Bridge peripheral controllers for handsets, PCs and tablets.
The ETD segment generated the remaining 0.9% of revenue. This
start-up segment includes Cypress Envirosystems, AgigA Tech Inc.
and Deca Technologies Inc., all majority-owned subsidiaries of
Cypress. ETD also includes the foundry business and other
development-stage activities. Revenue in this segment was $1.8
million, up 5.9% sequentially.
Operating Results
Reported gross margin for the quarter was 53.0%, up 350 bps
sequentially but down 150 basis points (bps) from the year-ago
quarter's 54.5%. The sequential increase was due to favorable
product and customer mix, solid manufacturing execution and
cost-cutting initiatives taken by management.
Operating expenses of $101.6 million decreased 9.5% year over year.
Reported operating margin was 2.5%, down 800 bps year over year.
R&D expenses increased as a percentage of sales, as did
SG&A expenses. Moreover, lower gross margins led to the decline
in the operating margin.
The quarter's GAAP net income was $5.0 million or earnings per
share of 3 cents, down from $40.8 million or 21 cents earned in the
comparable quarter last year. Excluding special items but including
stock-based compensation expense, non-GAAP net income was $8.4
million or earnings per share of 5 cents compared with $44.7
million or 23 cents a share in the year-ago quarter.
Balance Sheet
Cypress exited the second quarter with cash, cash equivalents and
short-term investments of approximately $210.8 million, up $102.1
million from the prior quarter. Trade receivables were $126.2
million, up from $102.1 million in the prior quarter.
Cash flow from operations was over $43.3 million, up from $16.3
million in the previous quarter. The company bought back 1.5
million shares of common stock for $19.9 million and also paid a
quarterly dividend of 11 cents per share. The company still has
approximately $202.3 million remaining under the authorized
repurchase program.
Guidance
Management expects third quarter revenue in the range of $197-$205
million (flat to plus or minus 2% sequentially). The gross margin
is expected in the range of 57-57.5%, which will vary with
manufacturing product mix.
Operating expenses are expected in the range of $82-$83 million.
Based on a share count of around 165 million, the non-GAAP EPS is
expected to be 18-21 cents.
Our Take
Cypress is a semiconductor company, offering high-performance,
mixed signal, programmable solutions. The company delivered a
decent second quarter, with both revenue and earnings above the
prior-quarter figures.
The TrueTouch family of products generated strong revenue this
quarter and we believe that the company's new hover technology,
which anticipates the touch of a finger before it makes contact
with the screen and vast product roadmap should further generate
healthy revenue this year.
The company's advanced technology, momentum in new products,
increased customer wins and growth initiatives make us optimistic.
However, a weak and uncertain macro environment and increased
pricing pressure remain causes for concern.
Cypress operates in a highly competitive market. In the touchscreen
market, the company competes with
Atmel Corporation
(
ATML
) and
Synaptics
(
SYNA
).
Currently, Cypress has a Zacks #3 Rank, implying a short-term Hold
recommendation.
ATMEL CORP (ATML): Free Stock Analysis Report
CYPRESS SEMICON (CY): Free Stock Analysis
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