) adjusted earnings in the second quarter of fiscal 2014 came in
at 38 cents per share, which missed the Zacks Consensus Estimate
by 3 cents.
Microsemi reported revenues of $287.0 million, up 12.3%
sequentially and 22.0% year over year as well as above the Zacks
Consensus Estimate of $286 million.
In the last quarter, book-to-bill ratio was greater than 1,
driven by orders for longer lead time products.
Revenues by End Market
Microsemi generates revenues from the Defense & security,
Aerospace, Communications and Industrial markets.
Defense & security market
generated 27% of sales, up 25% sequentially to $79.0 million. The
increase was aided by synergies from the Symmetricom acquisition
and improved market environment.
Around 35% of Microsemi's quarterly revenues came from the
which was up 3% sequentially to $100.0 million. Management
attributed the increase to strength in packet timing, OTN sales
in Asia and increased share gains from a new sapphire clock
management product family. Also, strengthening telecom spending
worldwide, including emerging markets such as China and India, is
benefiting the company.
improved 8% sequentially to approximately $43.0 million and
generated 15% of second-quarter revenues. The increase was
attributable to improving content growth trends in
electronic-oriented aircrafts and strong growth in commercial
Going forward, management believes that growing product mix
and strong industry fundamentals will continue to benefit this
end market. Additionally, the ramp up of more electronic aircraft
such as Boeing 787, Airbus A350 and A380 will lead to significant
generated 23% of sales, up 17% sequentially to $65.0 million,
driven by strong demand for ultra-low-power RF products.
Going forward, management expects strong revenues from this
end market from the ramp up of new chip scale atomic clocks which
helps in energy exploration applications and other new
was 50.7%, down 340 basis points (bps) sequentially and 600 bps
from 56.7% in the year-ago quarter. The decrease was due to
unfavorable product mix.
of $141.3 million were higher than the previous quarter's $121.7
million. As a percentage of sales, both general and
administrative and research & development (R&D) expenses
decreased from the year-ago quarter. The net result was a GAAP
operating margin of 1.4%, down 360 bps year over year.
Microsemi generated GAAP net loss of $8.7 million or loss of 9
cents a share compared with ($2.9) million or loss of 3 cents in
the year-ago quarter.
Excluding special items but including stock-based compensation
expense, non-GAAP net income was $36.2 million or earnings of 38
cents per share compared with $28.6 million or earnings of 31
cents in the year-ago quarter.
Cash and cash equivalents balance at quarter-end was $205.2
million, down $12.9 million from the first quarter. Cash
generated from operations was $30.2 million and capex was $8.7
million, netting a free cash flow of $21.5 million.
Inventories increased 6.6% to $202.1 million from $216.3
million in the previous quarter. Days sales outstanding (DSOs)
were 59 days, flat sequentially.
Microsemi provided guidance for the third quarter of fiscal
2014. Revenues are expected in the range of $287-$293 million, up
1.0% sequentially at the mid-point. Non-GAAP gross margins are
expected to increase in the range of 20-100 bps and earnings per
share are expected to be within 55-61 cents.
Microsemi's second-quarter earnings missed the Zacks Consensus
Estimate due to higher-than-expected operating expenses.
In the last quarter, the company gave an encouraging forward
guidance. It expects sequential dollar growth in all the end
markets, indicating improving demand environment and increased
Also, Microsemi's R&D program remains on track, helping
the company to manage its expenses well. Additionally, the
company's focus on security and increasing electronic content per
device and customer will eventually boost its market share.
However, management expects expenses to increase in the
upcoming quarter due to heavy investments in FPGAs and mixed
Microsemi has a Zacks Rank #3 (Hold). Other stocks that are
performing well at current levels include
Montage Technology Group Limited
). All these stocks sport a Zacks Rank #1 (Strong Buy).
CSR PLC-ADR (CSRE): Free Stock Analysis
MONTAGE TECH GP (MONT): Free Stock Analysis
MICROSEMI CORP (MSCC): Free Stock Analysis
ON SEMICON CORP (ONNN): Free Stock Analysis
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