Skyworks Solutions expects to generate nearly a billion
dollars in revenue during the first half of fiscal 2014 as the
wireless-chip supplier capitalizes on explosive demand for
connectivity and consumers' desire for anytime, anywhere
Woburn, Mass.-basedSkyworks (
) develops and manufactures high-performance, increasingly
complex analog semiconductor devices -- amplifiers, isolators,
attentuators, diodes, mixers, modulators and switches, to name a
few. It employs about 5,000 employees at facilities in the U.S.,
Mexico, Asia and Europe.
Skyworks' technology ends up in mobile phones, tablets and an
increasing array of cutting-edge products -- from sensor-laden
cars to smart thermostats, video game consoles, high-end
televisions and even fitness-tracking wristbands.
The Innovator Crowd
David Aldrich, Skyworks' president and CEO since its birth in
2002, told IBD that his company embraces a three-pronged approach
when providing solutions so its customers can better connect
people, places and things, often in ways previously not
"We focus on markets that are exhibiting or have potential for
growth, then look to be very focused on adding value to customers
by understanding what matters most to them and bringing products
that improve their system performance," he said.
"The third leg of the stool is having operations that are
extraordinarily numbers- and metrics-driven. We have systems and
measurements in place so we know exactly how products are
performing on behalf of customers and can continuously improve
them in terms of delivery, performance, quality, yields and cycle
New product launches and an aggressive push into new markets
have helped drive recent revenue growth, said Donald Palette,
Skyworks' chief financial officer.
Revenue rose 11% year-over-year to $505.2 million in fiscal
2014's first quarter (which ended in December), beating analysts'
consensus estimate. Operating income increased 24% to $141.8
million. Earnings per share rose to 67 cents from 55 cents,
topping guidance and outdoing analysts' estimates by a cent.
Skyworks anticipates another 11% year-over-year jump in
revenue to approximately $470 million in Q2, with earnings per
share increasing 23% to 59 cents, Palette said. Analysts polled
by Thomson Reuters expect revenue of $470.24 million and EPS of
59 cents when Skyworks reports the quarter on Tuesday, April 22,
after the stock market close.
Skyworks' financial performance comes amid increasing
consolidation in the industry. Two of Skyworks' main competitors
-- Hillsboro, Ore.-basedTriQuint Semiconductor (
) and Greensboro, N.C.-basedRF Micro Devices (
) -- announced a "merger of equals" in February. The merger is to
be finalized this year, pending approval from regulators and both
Further consolidation in the semiconductor industry may create
an environment in which there is less likelihood of aggressive
pricing of products than in the past, said Craig Ellis, senior
analyst at B. Riley & Co.
JMP Securities analyst Alex Gauna says that Skyworks' key
driver now and for the foreseeable future is the smartphone
market. This situation, he says, has concerned some investors as
sales growth for high-end smartphones, specifically theApple (
) iPhone and Samsung Galaxy F4 and F5, has slowed.
"That being said, some of (Skyworks') growth, some of their
opportunity on top of that, is driven by fitness wearables that
are wireless (and) by home automation," Gauna said. "They're in a
lot of new automotive applications. The automobile is so
sensor-intensive now, with a lot of RF (radio-frequency) and
analog content that Skyworks can provide."
In the first quarter, Skyworks reported that its technology
will help enable navigation-assist capabilities in some of next
) models and will go intoEricsson 's (ERIC) 4G LTE mobile
broadband base stations,Philips ' (PHG) wearable technologies and
wellness applications, and enhanced video-streaming applications
for TV set-top boxes, Blu-ray/DVD players and LED/4K
Nest, whichGoogle (GOOGL) recently bought for $3.2 billion,
uses Skyworks technology in its intelligent thermostats and smoke
detectors. Fitbit is employing Skyworks' products in wristband
Ascendiant Capital Markets senior research analyst Cody Acree
says that Skyworks is "very well respected in the sense that they
have a proven track record as having one of the broadest product
portfolios that is fresh and delivered on time."
Skyworks has consistently reinvested in R&D -- $58.4
million in Q1. Analysts say that it has nearly 1,000 patents and
supporting intellectual properties. "While they're investing more
in the future than their peers, they're also showing the best
operating profit of their peer group," analyst Gauna said.
Acree believes that Skyworks has positioned itself to provide
a broader array of product solutions to more companies that are
connecting devices to the Internet.
"Today there are roughly 10 billion devices connected to the
Internet, whether that be handsets, smartphones or home
appliances," Acree said. "By 2020, that's expected to be between
50 billion and 75 billion."
'Internet Of Things'
Aldrich said the billions of connected devices that make up
the "Internet of Things" will be enabled by a combination of
sensors, microcontrollers and, most importantly for Skyworks,
power-management and connectivity solutions, which dramatically
expand Skyworks' prospective markets.
Skyworks sees promising opportunities in medical devices,
gaming platforms, military and aerospace, smart energy and
industrial markets, some of which already are boosting the firm's
In fiscal 2013, revenue grew 14% to $1.79 billion. Operating
income grew 19% to $457 million, or 26% of sales. Skyworks
generated half a billion dollars in cash flow from operations and
repurchased more than 8 million shares of common stock.
Analysts' consensus EPS estimate for the fiscal year ending in
September 2014 is $2.61, and $2.91 for fiscal 2015. Skyworks
delivered $2.20 in fiscal 2012 and $1.90 in fiscal 2011.
For revenue, analysts expect about $2 billion for the fiscal
year ended September 2014 and $2.193 billion for fiscal 2015.
Looking ahead, Ellis said that Skyworks could significantly
benefit as telecom carriers in emerging countries upgrade from
voice-only 2G phones to 3G smartphones.
In China, carriers are transitioning from 3G service to LTE
services for customers.
"Skyworks is likely to have a very strong share position in
what could be 70 to 100 million phones produced for sale into the
Chinese market," Ellis said.