Maxim Integrated Products, Inc's
) second quarter fiscal 2013 earnings of 42 cents, excluding
special items but including stock-based compensation expenses,
beat the Zacks Consensus Estimate by a penny.
Revenues in the reported quarter were $605.3 million, down
2.9% sequentially but up 2.4% year over year. The revenues were
within management's guidance range of $595-$625
Revenues by End Market
end market remained the largest revenue contributor, accounting
for approximately 46% of total revenue, down 4.9% sequentially.
The 4.9% sequential decline in revenue was driven by weakness
across product lines. However, the main reason was Samsung
working down mobile phone-related inventories, a situation that
should reverse in the current quarter. Home entertainment and
appliances, which are a smaller part of Maxim's segment revenues
also continued to decline in the last quarter.
Maxim is expanding its product portfolio to sensors, motion
control and other areas of smartphones, tablets and hybrid
devices, which will increase its dollar content per device.
, the second largest segment, generated 25.0% of revenues, up
1.2% sequentially. In the last quarter, Maxim benefited from
strength in medical and smart meter markets that offset the
weakness in its general purpose products. Better internal lead
times also helped shipments in the last quarter.
The industrial automation & control segment remains weak
mainly because of distributors reducing inventories during the
quarter. The weakness is likely to continue, given macroeconomic
Revenues from the
end market were down 2.9% sequentially to 15.0% of total revenue.
The sequential decline was the result of continued softness in
the traditional telecom business as offset by strength in the
femtocell market. This is an area where existing customers have
started increasing orders. Maxim has also secured design wins, so
the momentum should continue.
Maxim is focusing on delivering next-generation networks with
improved coverage, capacity and reduced power consumption.
Further, management expects the introduction of highly integrated
solutions across its broad range of technologies to help drive up
network performance going forward.
Revenue from the
business fell 2.9% sequentially and contributed 14.0% of revenue.
The weakness was due to the decline in notebook sales.
The GAAP gross margin was 60.0%, down 187 basis points (bps)
sequentially but up 119 bps year over year. Management stated
that the sequential contraction in the gross margin was related
to lower utilization rates.
GAAP operating expenses of $245.8 million were up 11.6%
sequentially and 5.3% from the year-ago quarter. Higher R&D
as a percentage of sales, as well as higher restructuring and
asset impairment charges added to the lower gross margin,
offsetting the decline in SG&A (as a percentage of sales). As
a result, the GAAP operating margin declined 713 bps. although it
was still 6 bps up from the year-ago quarter. All expenses
declined year over year as a percentage of sales.
The pro forma net income was $124.8 million or a 20.6% net
income margin compared with $139.1 million or 22.3% in the
previous quarter and $100.7 million or 17.0% of sales in the
year-ago quarter. Our pro forma calculation excludes
restructuring, intangibles amortization, asset impairments and
other one-time charges on a tax-adjusted basis, but includes
stock based compensation charges in the last quarter.
Including these items, the company recorded GAAP net income of
$76.6 million or $0.26 per share compared with $127.9 million or
$0.43 per share in the previous quarter and $88.1 million or
$0.29 per share in the year-ago quarter.
Inventories were down 0.4% to $257.7 million. The cash and
marketable securities balance was $1.03 billion, up $105.2
million or 11.4% during the quarter.
Cash generated from operations was $255.1 million, with Maxim
spending around $62.1 million on capex, $70.1 million on cash
dividends and $50.4 million on share repurchases. Maxim has $3.9
million of long-term debt.
For the third quarter of fiscal 2013, Maxim expects revenues
in a range of $580-$610 million. Backlog is expected to be$353
The gross margin is expected be in the 58-61% range on a GAAP
basis and 60-63% on an adjusted basis.
Earnings are expected to be 39 cents - 43 cents on a GAAP
basis as well as adjusted basis.
Maxim's business is well-diversified and it has increased its
focus on faster-growth markets in the last few years. The company
currently generates a significant percentage of its revenues from
the consumer and computing end markets. While consumer is showing
signs of strength, there are issues in the computing business
that may hurt its results in the near term.
However, Maxim has outperformed the broader market owing to
its superior technology and innovation, which leads to continued
design wins not just in the U.S. but also in emerging
While Maxim's product line and pipeline of new products remain
solid and its end-market diversity is commendable, we believe its
exposure to the consumer and computing markets increases
Maxim's shares currently carry a Zacks Rank #3 (Hold).
Investors should look out for some other stocks that are
slated to report this earnings season with positive Zacks Rank
and Expected Surprise Prediction or ESP (Read:
Zacks Earnings ESP: A Better Method
) has a Zacks Rank #2 (Buy) with an ESP of +14.3%. Further,
investors can consider other semiconductor stocks such as
), both of which have a Zacks Rank #1 (Strong Buy).
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