Cypress Semiconductor Corporation
) reported third-quarter 2013 earnings of 3 cents per share,
above the Zacks Consensus Estimate of 1 cent due to higher gross
margins and tight operating expense control. The adjusted
earnings per share exclude one-time items but include stock-based
Cypress reported revenues of $188.7 million, down 2.5%
sequentially and 7.0% year over year. The decline was due to
weakness in the mobile handset market. However, revenues were
above management's revised guidance range of $184.0
In the reported quarter, the book-to-bill ratio was 0.75
versus 1.05 in the prior quarter.
Revenues by Segment
The Programmable Systems Division (PSD) segment, which
generated 41.4% of third-quarter revenues, consists of two
divisions. The first is the old Consumer and Computation Division
(CCD) comprising TrueTouch, CapSense and Ovation businesseswhile
the second division includesthe core PSoC business. The segment
decreased 4.0% sequentially to $78.1 million due to softness in
CapSense business from a specific customer, partially offset by
slight growth in the TrueTouch business.
The Memory Products Division (MPD) generated 47.0% of
revenues, up 1.0% sequentially to $88.7 million. This division
continues to focus on four SRAM business units, general-purpose
programmable clocks and process technology licensing.
The Data Communication Division (DCD) generated 10.0% of
revenues, down 11.0% sequentially to $18.9 million due to USB
weakness owing to a declining PC market. This division has been
realigned to focus solely on USB controllers, Wireless USB and
West Bridge peripheral controllers for handsets, PCs and
The Emerging Technology Division (ETD) generated the remaining
1.6% of revenues amounting to $3.0 million, up 9.0% sequentially.
This start-up segment includes Cypress AgigA Tech Inc., Deca
Technologies Inc. and all majority-owned subsidiaries of Cypress.
The ETD division also includes the foundry business and other
Reported gross margin for the quarter was 48.6%, up 140 basis
points (bps) sequentially but down 560 bps from the year-ago
quarter's 54.2%. The sequential increase was mainly due to
favorable customer mix and continued cost-reduction efforts.
Operating expenses of $101.6 million increased 7.0% year over
year from $95.0 million in the year-ago quarter. Reported
operating margin was (5.3%), down significantly from the year-ago
quarter margin of 7.4%. Both research and development (R&D)
and selling, general and administrative (SG&A) expenses
increased as a percentage of sales.
The quarter's GAAP net loss was $8.4 million or 6 cents per
share versus net earnings of $3.8 million or 2 cents per share in
the last quarter and $14.3 million or 9 cents in the comparable
quarter last year. Excluding special items but including
stock-based compensation expense, non-GAAP earnings were $4.2
million or 3 cents per share compared with earnings of $9.5
million or 6 cents per share in the last quarter.
Cypress exited the third quarter with cash, cash equivalents
and short-term investments of approximately $101.4 million versus
$102.0 million in the prior quarter. Trade receivables were
$108.2 million, down from $114.8 million in the prior
During the quarter, Cypress' cash flow from operations was
approximately $7.9 million, spending $10.8 million on capex. The
company also paid quarterly dividend worth $16.3 million.
Management expects fourth-quarter 2013 revenues in the range
of $163.0 million-$170.0 million (down 10.2% sequentially at the
midpoint) due to continued weakness in PSD business. Management
also expects MPD and DCD businesses to decline sequentially in
the fourth quarter.
Gross margin is expected to be approximately 52.5%, which will
vary with manufacturing product mix. Operating expenses are
expected in the range of $72.0 million-$73.0 million while
non-GAAP earnings per share are likely to be in the range of 7
cents-9 cents (down 54.3% sequentially at the midpoint).
Cypress is a semiconductor company, offering high-performance,
mixed signal and programmable solutions. The company delivered
decent third-quarter results with earnings above the Zacks
In the quarter, the company saw greater-than-expected weakness
in the mobile handset market in Asia. Additionally, lead time
continues to be low, further reducing revenue visibility. Also,
management provided a weak forward guidance, indicating weak
Though we remain optimistic about the company's advanced
technology and momentum in new products, weak macro environment
and poor visibility related to order patterns remain causes of
Cypress has a Zacks Rank #4 (Sell). Other stocks that have
been performing well and are worth a look include
). All these stocks carry a Zacks Rank #1 (Strong Buy).
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