) adjusted earnings per share (EPS) for the second quarter of
fiscal 2013 came in at 32 cents, beating the Zacks Consensus
Estimate by 2 cents or 6.7%.
Microsemi reported revenues of $235.3 million, down 5.0%
sequentially and 5.6% year over year.
Revenues by End Market
Microsemi generates revenues from the Defense, Aerospace,
Enterprise & Commercial, and Industrial markets.
Defense & security
market generated 34% of sales, up 4.2% sequentially to $80.0
million. Two major missile defense programs drove Microsemi's
revenues in the quarter. Management remains optimistic about
Microsemi's total solution approach, which is helping it add
value to its offerings.
Around 27% of Microsemi's quarterly revenues came from the
market. Management attributed the 17.2% sequential decline to
broad-based weakness in the market caused by lingering macro
The PoE, power management, RF and voice circuit product lines
were particularly weak although timing and sync fared better.
However, management expects bookings to rebound, driven by
seasonality, market share gains and expansion into small cell
markets from the second half of 2013.
segment declined 5.0% sequentially to generate 19% of revenues,
attributable to sluggish market conditions. Longer-lead time
business remains soft according to management, although
strengthening in other areas over the past three quarters will
lead to growth in the next quarter.
market generated 20% of sales, which was flat sequentially.
Trimble saw softness in the solar market, which was offset by
strength in other areas. Microsemi saw bookings improve in
semicap, industrial lasers, MRI and other broad-line industrial
The reported gross margin was 56.7%, down 86 basis points
(bps) from the previous quarter's 57.6% but up 383 bps from 52.9%
in the year-ago quarter. The sequential decline was due lower
volumes and unfavorable mix. The year-over-year expansion was due
to a growing percentage of new high-margin products in the mix
and cost reduction that were enough to offset the lower
Operating expenses of $121.7 million were higher than the
previous quarter's $117.1 million. The operating margin
contracted 528 bps sequentially but expanded 56 bps year over
year, touching 5.0%. Both research and development (R&D) and
selling, general and administrative (SG&A) expenses increased
sequentially as a percentage of sales, which combined with the
weaker gross margin pulled down the operating margin.
Trimble generated a GAAP net loss of $2.9 million, or 3 cents
a share in compared with income of $14.2 million or 16 cents a
share in the previous quarter and loss of $4.8 million, or 6
cents a share in the year-ago quarter.
Excluding these special items, pro forma net income was $28.7
million (12.2% of sales) compared with $30.3 million (12.2%) in
the year-ago quarter and $37.0 million (14.9%) in the previous
The cash and cash equivalents balance at quarter-end was
$206.9 million, up $3.6 million during the second quarter. Cash
generated from operations was $31.9 million and capex was $9.0
million, netting a free cash flow of $22.9 million.
Inventories increased 2.3% to $162.7 million from $158.9
million in the previous quarter. Days sales outstanding (DSOs)
increased to 62 days from 58 days in the last quarter.
Microsemi provided guidance for the third quarter of fiscal
2013. Revenues are expected to increase 2-4%, non-GAAP gross
margins are expected to be 56.7-57.3% and the tax rate 7.0%. The
non-GAAP earnings per share are expected to be around 47-50
cents, better than the Zacks Consensus Estimate of 38 cents.
Microsemi reported a disappointing second quarter but provided
a modest guidance.
The company is seeing weakness across its major markets,
although its R&D program remains on track. Management is
focusing on security and increasing the electronic content per
device and customer, which will eventually boost its market
However, uncertainty in short-term defense programs owing to
apprehensions over 'sequestration' could temper the effects of
increasing electronic content in defense applications.
Microsemi has a Zacks Rank #3 (Hold).
Better investments at this point could be the following
technology stocks with positive Zacks Rank and Earnings Expected
Surprise Prediction or ESP (Read:
Zacks Earnings ESP: A Better Method
APPLD MATLS INC (AMAT): Free Stock Analysis
AOL INC (AOL): Free Stock Analysis Report
FACEBOOK INC-A (FB): Free Stock Analysis
MICROSEMI CORP (MSCC): Free Stock Analysis
To read this article on Zacks.com click here.
) with an ESP of +3.03% and Zacks Rank #2 (Buy)
) with an ESP of +12.50% and Zacks Rank #2
Applied Materials Inc.
) with an ESP of +7.69% and Zacks Rank #2