Maxim Integrated Products, Inc.
) fourth quarter fiscal 2013 earnings of 44 cents, excluding
special items, but including stock-based compensation expenses,
missed the Zacks Consensus Estimate by 3 cents or 6.4%.
Revenues in the reported quarter were $608.2 million, up 0.5%
both sequentially and year over year. Revenues missed
management's guidance range of $610-$640 million.
Revenues by End Market
end market remained the largest revenue contributor, accounting
for approximately 44% of total revenue, down 9.7% sequentially
but up 2.9% year over year. The sequential decline was due to
weakness in smartphones as it was impacted by inventory
correction for Samsung's S III, which is also Maxim's largest
Maxim is expected to face slowdown due to weakness in demand
for Samsung's latest flagship device Galaxy S4 and inventory
correction. However, Maxim is making in-roads into several other
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
, Maxim's second largest segment, generated 29% of revenues, up
16.6% sequentially and 12.1% year over year. Maxim benefited from
strong order bookings in the automotive, smart meter and medical
end market segments, which was offset by weakness in control and
automation segment orders.
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.
Revenues from the
end market were up 7.7% sequentially but down 5.7% year over year
to 15% of total revenue. The sequential increase was the result
of improvement in the Networking and Datacom segment, which was
offset by decline from base stations. Maxim is witnessing
strength in sales in cable infrastructure products. Maxim is also
witnessing improvements in its fiber optics business due to
improvements in the Chinese markets. It also secured a new design
win for PON deployments with a major Chinese vendor.
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 were up 0.5% sequentially but fell 19.6% year over year
and contributed 12.0% of revenues. The weakness was due to the
decline in notebook sales.
GAAP gross margin was 61.1%, down 111 basis points (bps)
sequentially and 42 bps year over year. The decline in gross
margin was related to lower factory utilization and higher
GAAP operating expenses of $220.3 million were down 0.7%
sequentially and 6.6% 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. As a result, GAAP
operating margin decreased 67 bps sequentially but rose 236 bps
from the year-ago quarter to 24.8%.
Pro forma net income was $129.5 million or a 21.3% net income
margin compared with $134.6 million or 22.3% in the previous
quarter and $134.7 million or 22.3% 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
$119.0 million or 40 cents per share compared with $128.8 million
or 43 cents per share in the previous quarter and $110.6 million
or 37 cents per share in the year-ago quarter.
Balance Sheet &Cash Flow
Inventories were up 2.8% to $275.6 million. The cash and
marketable securities balance was $1.20 billion, down $373.0
million or 23.7% during the quarter.
Cash generated from operations was $214.4 million, with Maxim
spending around $48.9 million on capex. Maxim has $503.6 million
of long-term debt.
Share Repurchase & Dividend
Maxim authorized a new share repurchase program worth $1
billion and increased cash dividend by 8% to $0.26 per share.
Maxim spent $69.5 million on cash dividends and $193.2 million on
For the first quarter of fiscal 2014, Maxim expects revenues
in a range of $570-$600 million. Backlog is expected to be $357
Gross margin is expected be in the 59%-62% range on a GAAP
basis and 60%-63% 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
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
Currently, Maxim's shares carry a Zacks Rank #4 (Sell).
Semiconductor stocks that are worth considering include
Linear Technology Corp.
Microchip Technology Inc.
), all carrying a Zacks Rank #2 (Buy).
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