Microsemi Corporation (MSCC): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
Microsemi Corporation is an OEM of a broad range of high-reliability and analog/mixed signal integrated circuits. First quarter results surpassed the Zacks Consensus Estimate. The company also provided a strong forward guidance. The bulk of revenue comes from stable end markets (defense, aerospace and medical equipment), where Microsemi serves most of the largest players. Microsemi's compelling products, scope for margin expansion and decent balance sheet are other positives. However, macro-driven weakness and heavy investment in R&D could impact near term profitability. We are therefore downgrading Microsemi shares from Outperform to Neutral.

Overview:

Irvine, California-based Microsemi Corporation (MSCC) offers a broad range of semiconductor integrated circuit (IC) products, broadly categorized into the high reliability and analog/mixed signal categories.

The high reliability products are primarily targeted at military, aerospace and medical markets. The analog/mixed signal products are intended for backlighting in LCD TVs, monitors, notebooks, PDAs and cell phones, as well as data storage devices, wireless LAN, automotive, telecommunications, test instruments, high-quality sound reproduction and data transfer equipment among others.

The company's products are focused on the light, sound and power management areas of the semiconductor sector. Power management semiconductors generally refer to a class of standard linear integrated circuits ("SLICs") that perform voltage regulation and referencing in most electronic systems. The scope of power management has broadened in recent years to encompass other devices and modules, including application specific standard products ("ASSPs ), which address particular aspects of power management, such as audio or display-related ICs. Microsemi s portfolio is composed of both a core platform of traditional SLICs, such as low dropout regulators ("LDOs) and pulse width modulators ("PWMs ), as well as differentiated ASSPs such as backlight inverters and small computer standard interface ("SCSI") terminators. These products manage, control and regulate power protect against transient voltage spikes and transmit, receive and amplify signals.

Revenue distribution by end market in fiscal 2013 was as follows Communications 29% (down 10.8% from 2011), Defense & Security 31% (up 6.9%), Aerospace 19% (down 11.9%) and Industrial 21% (up 1.3%).

At the end of 2013, the company operated ten domestic fabrication facilities Garden Grove, La Mirada, Folsom, Camarillo, San Jose and Santa Clara (California) Bend (Oregon) Phoenix (Arizona) and Lawrence and Lowell (Massachusetts). International manufacturing locations include Shanghai (China), Ennis (Ireland), Manila (the Philippines) and Caldicot (the U.K.). Nearly 90% wafer requirements and assembly and test requirements are sourced externally.

The U.S. government was the end customer for approximately 31% of 2013 net sales.

Around 53% of 2013 sales were generated in the U.S. (up 2.7% from 2012), 15.0% came from Europe (down 14.2%) and the remaining 32% from Asia (down 8.7%).

The broad product lineup brings with it competition from a large number of companies. The most significant competition comes from Freescale Semiconductor, National Semiconductor, Texas Instruments, Fairchild Semiconductor, Micrel, International Rectifier, Semtech, Linear Technology, Maxim, Skyworks, Diodes, O2Micro and Triquint.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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Referenced Stocks: IC , MSCC

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