Maxim Integrated Products, Inc.'s
) third quarter fiscal 2013 earnings of 45 cents, excluding
special items but including stock-based compensation expenses,
beat the Zacks Consensus Estimate by 3 cents or 7.1%.
Revenues in the reported quarter were $604.9 million, down
0.1% sequentially but up 5.9% year over year. Revenues were
within management's guidance range of $580-$610
Revenues by End Market
end market remained the largest revenue contributor, accounting
for approximately 49% of total revenue, up 6.4% sequentially and
26.6% year over year. Maxim witnessed strong growth due to
strength in smartphones, as it started shipping to its largest
customer, Samsung for its S4 smartphone model.
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, flat
sequentially but down 1.9% year over year. In the last quarter,
Maxim benefited from strength in the automotive end market and a
slight increase in general purpose industrial categories, which
were however offset by weakness in other areas.
Currently, Maxim is focusing on ASSP solutions as it provides
highly integrated products in select end market segments such as
automotive, smart meters and medical. It is also trying to
strengthen its position in the general purpose market by
providing high-performance analog building block products.
However, this segment is affected by macroeconomic variables.
Revenues from the
end market were down 6.7% sequentially and 12.8% year over year
to 14.0% of total revenue. The sequential decline was the result
of continued softness in the Networking and Datacom segment.
Maxim is witnessing strength in sales in cable infrastructure
products. It expects that revenues from the Networking and
Datacom segment will improve in the coming quarters.
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
network performance going forward.
Revenues from the
business fell 14.3% sequentially and 15.3% year over year and
contributed 12.0% of revenues. The weakness was due to the
decline in notebook sales.
The GAAP gross margin was 62.2%, up 215 basis points (bps)
sequentially and 346 bps year over year. Management stated that
the improvement in the gross margin was related to higher factory
utilization, lower reserves and lower one-time items.
GAAP operating expenses of $221.8 million were down 9.8%
sequentially and 0.8% from the year-ago quarter. Sequentially,
lower research and development (R&D) expenses as a percentage
of sales as well as lower restructuring and asset impairment
charges positively impacted the gross margin, offsetting the rise
in selling, general and administrative (SG&A) expenses (as a
percentage of sales). As a result, the GAAP operating margin
increased 609 bps sequentially and 592 bps from the year-ago
quarter to 25.5%.
Pro forma net income was $134.6 million or a 22.3% net income
margin compared with $124.8 million or 20.6% in the previous
quarter and $99.5 million or 17.4% 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
$128.8 million or 43 cents per share compared with $76.6 million
or 26 cents per share in the previous quarter and $22.7 million
or 8 cents per share in the year-ago quarter.
Inventories were up 4.0% to $268.0 million. The cash and
marketable securities balance was $1.57 billion, up $542.8
million or 52.7% during the quarter.
Cash generated from operations was $211.7 million, with Maxim
spending around $54.9 million on capex, $70.4 million on cash
dividends and $66.3 million on share repurchases. Maxim has
$503.6 million of long-term debt.
For the fourth quarter of fiscal 2013, Maxim expects revenues
in a range of $610-$640 million. Backlog is expected to be $386
On a GAAP basis, gross margin is expected be in the 61-64%
Earnings are expected to be 45 cents - 49 cents on a GAAP
Maxim's business is well-diversified. It has increased its
focus on the faster-growing 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
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 commendable, we believe its
exposure to the consumer and computing markets increases
Maxim's shares currently carry a Zacks Rank #2 (Buy).
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