Cypress Semiconductor Corp.
) slashed its revenue and earnings guidance for the third quarter
of 2013 and also provided a preliminary guidance for the fourth
The chip maker now expects sales of $184 million-$187 million,
down from its previous guidance range of $201 million to $207
million, to account for the reduced demand from its major handset
customers. The earnings per share outlook has also been lowered
to 10 cents-12 cents from the previous guidance of 17 cents -18
Management had previously projected revenues to improve as a
result of seasonality and new customer and new program ramps in
Programmable Systems Division (PSD).
However, now, the company is seeing greater-than-expected
weakness in the mobile handset market in Asia. Management said
that the guidance cut was on account of purchase delay of certain
new handsets until the first quarter and order reductions due to
inventory adjustments at various end customers in China.
Additionally, lead time continues to be low, further reducing
However, for the third quarter, the company increased its
gross margin guidance to 53.5% to 54.0%, higher than the previous
expectation of 53.5%. Operating expenses are also expected to
decline to $77 million-$78 million, down from the prior guidance
of $78 million-$79 million, owing to tight expense control
Going into the fourth quarter of 2013, management expects
revenues to decrease in the range of 9%-11% sequentially.
Management believes that continued weakness in TrueTouch
touchscreen controller, expected inventory corrections at certain
end customers and lower communications revenues impacting Memory
Products Division (MPD) will continue to impact revenues in the
Though the company did not specify gross margin decline in
absolute terms, it expects gross margins to decrease sequentially
on lower factory utilization rates. However, operating expenses
are expected to decline 4% to 6% sequentially due to lower
variable compensation expense and continued tight operating
Cypress is a semiconductor company, offering high-performance,
mixed signal, programmable solutions. The company reported
revenues of $193.5 million in the second quarter, up 12.0%
sequentially and above management's guidance range of $178.0
million-$186.0 million due to broad strength across all business
units. Earnings were also above our expectations driven by higher
revenues, higher gross margins and solid operating expense
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 remains a cause of
Currently, Cypress has a Zacks Rank #3 (Hold). Other stocks
that are performing well include
Ctrip.com International Ltd
Supernus Pharmaceuticals, Inc.
). All these stocks carry a Zacks Rank #1 (Strong Buy).
CTRIP.COM INTL (CTRP): Free Stock Analysis
CYPRESS SEMICON (CY): Free Stock Analysis
MICRON TECH (MU): Free Stock Analysis Report
SUPERNUS PHARMA (SUPN): Free Stock Analysis
To read this article on Zacks.com click here.