Maxim Integrated Products, Inc
) first quarter fiscal 2014 earnings (excluding special items but
including stock-based compensation expenses) of 41 cents per
share, beat the Zacks Consensus Estimate by a couple of cents.
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Revenues in the reported quarter were $585.0 million, down 3.8%
sequentially and 6.1% on a year over year basis. Revenues missed
the Zacks Consensus Estimate of $590.0 million.
Revenues by End Market
The Consumer end market remained the largest revenue contributor,
accounting for approximately 43.0% of revenues compared with
44.0% in the prior quarter. The sequential decline was due to
weakness in smartphones. Samsung happens to be Maxim's largest
Maxim's expansion into sensors, motion control and other areas of
smartphones, tablets and hybrid devices is proving to be
beneficial as it secured design wins for its sensor technology.
Further, Maxim is also expanding its mobile solutions toward
mid-range smartphones as high-end smartphones are witnessing a
Industrial, Maxim's second largest segment, generated 29.0% of
revenues, thus remaining flattish sequentially. Although
Automotive grew for the third straight quarter, Industrial
business declined slightly due to seasonal weakness lower revenue
growth in Smart Meter and Medical businesses...
Revenues from the Communications end market were 16.0% of
revenues compared with 15% in the prior quarter. The sequential
increase was driven by robust performance from Networking and
Revenues from the Computing business contributed 12.0% of
revenues, flattish sequentially. Revenue from Volterra in the
September quarter was $ 36.0 million.
Non-GAAP gross margin was 60.7%, down 160 basis points (bps)
sequentially and 270 bps year over year. The decline in gross
margin was attributed to unfavorable product mix, lower factory
utilization and higher inventory reserves.
Non-GAAP operating expenses of $207.3 million were down 3.2%
sequentially and 2.7% from the year-ago quarter due to stringent
Pro forma net income was $119.5 million compared with $129.5
million in the prior quarter and $139.1 million 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
$103.1 million compared with $119.0 million in the previous
quarter and $127.9 million in the year-ago quarter.
Balance Sheet & Cash Flow
During the quarter, cash flow from operations was $96.0 million,
down from $214.4 million in the prior quarter due to
the payment of the annual employee bonus. Inventory was 110 days,
The cash and marketable securities balance was $1.03 billion,
down $165.5 million or 13.8% during the quarter.
Cash generated from operations was $95.9 million, with the net
capex being $33.0 million. Maxim has $500.9 million of long-term
Share Repurchase & Dividend
Maxim spent $74.0 million on cash dividends and $154.0 million on
share repurchases in the reported quarter.
For the second quarter of fiscal 2014, Maxim expects revenues in
a range of $605-$635 million (including $35 million to $37
million from Volterra). Backlog is expected to be $417.0 million.
Management expects communication revenues to be flat in the next
quarter. It expects its revenues in the computing market to be up
sequentially, driven primarily by the Volterra acquisition.
Gross margin is expected be in the 58%-61% range on a GAAP basis
and 59%-62% on an adjusted basis.
Earnings are expected to be 34 cents - 38 cents on a GAAP basis
and 37 cents - 41 cents on an adjusted basis.
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 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 markets.
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 risks.
Currently, Maxim's shares carry a Zacks Rank #3 (Hold).
Semiconductor stocks that are worth considering include
) with Zacks Rank # 3 (Hold),
Microchip Technology Inc.
), both carrying Zacks Rank #2 (Buy).