Cypress Semiconductor Corporation
) reported fourth-quarter 2013 loss of 4 cents per share, worse
than the Zacks Consensus Estimate of loss of 1 cent per share.
The adjusted earnings per share exclude one-time items but
include stock-based compensation expense.
Cypress reported revenues of $167.8 million, down 11.1%
sequentially and 6.9% year over year. The soft revenues were due
to normal seasonal declines in all divisions. However, revenues
were slightly above the Zacks Consensus Estimate of $167 million
and at the higher end of management's guidance range of $163.0
In the quarter, the company reported book-to-bill ratio of
1.08 versus 0.75 in the prior quarter.
Revenues by Segment
The Programmable Systems Division (PSD) segment, which
generated 40.4% of fourth-quarter revenues, consists of two
divisions. The first is the old Consumer and Computation Division
(CCD) comprising TrueTouch, CapSense and Ovation businesses,while
the second division includesthe core PSoC business. The segment
decreased 13.0% sequentially to $67.7 million due to softness in
year-end inventory adjustments in TrueTouch and CapSense
The Memory Products Division (MPD) generated 47.6% of
revenues, down 10.0% sequentially to $79.9 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 9.8% of
revenues, down 13.0% sequentially to $16.5 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
2.2% of revenues amounting to $3.7 million, up 24.0%
sequentially. The increase was due to rise in new customers and
design wins. 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 development-stage activities.
Reported gross margin for the quarter was 45.6%, down 300
basis points (bps) sequentially and 110 bps from the year-ago
quarter's 46.7%. The sequential decrease was mainly due to
unfavorable mix and lower volumes.
Operating expenses of $87.3 million decreased 17.3% year over
year from $105.7 million in the year-ago quarter. Reported
operating margin was (6.5%), narrower than the year-ago quarter
margin of (11.9%). Both research and development and selling,
general and administrative expenses decreased as a percentage of
The quarter's GAAP net loss was $13.6 million or 9 cents per
share versus $8.4 million or 6 cents per share in the last
quarter and $22.2 million or 15 cents in the comparable quarter
last year. Excluding special items but including stock-based
compensation expense, non-GAAP loss was $6.1 million or 4 cents
loss per share compared to earnings of $4.2 million or 3 cents
per share in the last quarter.
Cypress exited the fourth quarter with cash, cash equivalents
and short-term investments of approximately $104.5 million versus
$101.4 million in the prior quarter. Trade receivables were $81.1
million, down from $108.2 million in the prior quarter.
During the quarter, Cypress' cash flow from operations was
approximately $20.2 million, spending $8.8 million on capex. The
company also paid quarterly dividend worth $16.6 million.
Management expects first-quarter 2014 revenues in the range of
$161.0 million-$168.0 million (flat to down 4% sequentially at
the mid-point). Management expects PSD to perform slightly better
than normal seasonality in the first quarter.
Gross margin is expected to be flat, approximately 51%, which
will vary with manufacturing product mix. Operating expenses are
expected to be $71.5 million, tax expense of 7%, while non-GAAP
earnings per share are likely to be in the range of 5 cents-7
Cypress is a semiconductor company, offering high-performance,
mixed signal and programmable solutions. Though the top-line
results surpassed the Zacks Consensus Estimate, the bottom-line
figures failed to do so.
In the quarter, the company saw weakness in all the end
markets, including handsets, computation and communication
markets. Additionally, customer lead time continues to be low,
further reducing revenue visibility.
Though we remain optimistic about the company's advanced
technology, improving book-to-bill ratio, and momentum in new
products, weak macro environment and poor visibility related to
demand patterns remain causes of concern.
Cypress has a Zacks Rank #4 (Sell). Other stocks that are
performing well at current levels include
M/A-Com Technology Solutions Holdings, Inc.
). All these stocks carry a Zacks Rank #1 (Strong Buy).
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