Cypress Semiconductor Corporation
(
CY
) has reported first-quarter 2012 loss of 5 cents per share, in
line with the Zacks Consensus Estimate on lower Touch sales. The
adjusted loss per share excludes one-time items, but includes
stock-based compensation expense.
Revenue
Cypress reported revenue of $185.1 million, down 23.6%
sequentially and 20.6% year over year but within management's
revised guidance range of $180-$190 million. The sequential
decrease was due to the weakness in the handsets market,
specifically the TrueTouch revenue stream, which in turn, was due
to the late introduction of the newest Gen4 product.
In the reported quarter, the book-to-bill ratio was over 1.33,
the highest in two years, reflecting strong signs of recovery in
2012.
Revenue by Segment
Starting from the first quarter of 2012, Cypresshas 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 44% of first 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
declined 38.4% sequentially due to lower demand for handsets and
seasonality.
The MPD segment generated 44.3% of revenue, decreasing 9.1%
sequentially due to inventory adjustments and lower demand from the
major SRAM wireless customers. This existing division will continue
to focus on four static random access memory (SRAM) business units,
general-purpose programmable clocks and process technology
licensing.
The DCD segment generated 10.8% of revenue, which was up 6.4%
sequentially on increases in WestBridge, partially offset by normal
seasonal declines in USB. This division has been realigned to focus
solely on USB controllers, WirelessUSB and WestBridgeperipheral
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 foundry business and other
development-stage activities. Revenue in this segment was $1.7
million, up 54.4% sequentially.
Operating Results
Reported gross margin for the quarter was 53.4%, down 20 bps
sequentially and 230 basis points (bps) from the year-ago quarter's
55.7% due to unfavorable mix and lower factory utilization
rates.
Operating expenses of $109.4 million rose 5.6% sequentially and
48.6% year over year. Reported operating margin was (5.7%), down
1,650 bps sequentially and 2,930 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
quarters operating margin.
The quarter's GAAP net income was ($12.4) million or loss per
share of 8 cents, down from $55.4 million or 28 cents earned in the
comparable quarter last year. Excluding special items but including
stock-based compensation expense, non-GAAP net loss was $8.2
million or loss per share of 5 cents compared with a non-GAAP net
income of $27.6 million or 14 cents a share in the year-ago
quarter.
Balance Sheet
Cypressexited the first quarter with cash, cash equivalents and
short-term investments of approximately $108.7 million, a decrease
of $57.6 million from the prior quarter. Trade receivables were
$102.1 million, down from $103.5 million in the prior quarter.
Cash flow from operations was over $16.3 million, down from
$65.5 million in the previous quarter. The company bought back 6.1
million shares of common stock (3.9% of total outstanding shares)
for $98.0 million and also approved a quarterly dividend of 11
cents per share, up 22% sequentially.
Guidance
Management provided guidance for the second quarter.
Accordingly, revenue is expected to lie in the $200-$207 million
range (up 8-12% sequentially). The gross margin is expected in the
range of 56-57%, which will vary with manufacturing product mix.
Operating expenses are expected in the range of $83-$84 million.
Based on a share count of around 169 million to 170 million, the
non-GAAP EPS is expected to be 17-28 cents. Management also expects
capex at 8-10% of revenue and depreciation at 11% of revenue.
Our Take
Cypressis a semiconductor company, offering high-performance,
mixed signal, programmable solutions. The first quarter lacked
luster, with both revenue and earnings lagging prior-year figures.
However, the revenue and earnings numbers were in line with the
Zacks Consensus estimates.
Though the TrueTouch family of products could not generate
enough revenue in this quarter, 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
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.
Cypressoperates in a highly competitive market. In the
touch-screen market, the company competes with
Atmel Corporation
(
ATML
) and
Synaptics
(
SYNA
).
Currently, Cypresshas a Zacks #3 Rank, implying a short-term
Hold recommendation.
ATMEL CORP (
ATML
): Free Stock Analysis Report
CYPRESS SEMICON (
CY
): Free Stock Analysis Report
SYNAPTICS INC (
SYNA
): Free Stock Analysis Report
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