We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Synaptics (SYNA) Goes on Restructuring Drive, Stock Plunges
Read MoreHide Full Article
Shares of Synaptics Inc. (SYNA - Free Report) fell over 10% on Friday after the company announced a series of restructuring changes. Per the SEC filing, the company will slash 9% of its workforce (or 160 employees) along with closing multiple offices to “align the company’s cost structure consistent with its revenue levels.”
Synaptics expects one time charges, to be recognized in the fourth quarter of 2016 and fiscal 2017, of approximately $10 million to $11 million as severance and one-time benefits and another $3 to $4 million mostly as lease cancellation charges and related costs.
Synaptics is primarily engaged in developing human interface solutions for a wide array of mobile computing and communications devices and is one of the leading suppliers of TouchPads to the notebook computer market. The company boasts Apple Inc (AAPL - Free Report) as one of its biggest clients along with Asian giants like Samsung, Huawei and Lenovo.
However, declining iPhone sales and overall softness in the high end smartphone market are proving to be a big impediment to revenue growth. In the third quarter of fiscal 2016, the company’s revenues were down nearly 16% year over year. Even the weakness in the PC business is wreaking havoc on Synaptics’ financial performance.
The company trimmed its fourth quarter outlook given the rapid demand decline from high end smartphone OEMs. The company expects revenues in the current quarter to be in the range of $300 million to $340 million, below $479 million registered in the year-ago quarter.
However, the company expects this to be a “temporary pause” in growth and expects things to improve in the second half of the calendar year.
We believe that the sluggish macro backdrop and no near-term respite for weakness in the smartphone market are unlikely to be counterbalanced by TDDI (Touch and Display Driver Integration) and fingerprint business opportunities.Though the company won a large number of contracts for its display driver and fingerprint authentication products, it will face significant pricing pressure in 2016. In the last few months, Synaptics has inked deals with Microsoft Corp. (MSFT - Free Report) , Xiaomi and Lenovo, among others.
Also, increasing competition, and the ongoing uncertainty in the Chinese economy can prove to be a headwind for the company as it derives a significant portion of revenues from the region.
However, analysts state that a buyout, speculations of which have been around for some time, should be a positive for the company. Also, a strong shareholder repurchase plan will cushion the company’s earnings. Moreover, strategic acquisitions like Renesas SP Drivers, which have greatly expanded its offerings, are added positives.
At present, Synaptics carries a Zacks Rank #5 (Strong Sell). A better-ranked stock in the same space is Amkor Technology, Inc. (AMKR - Free Report) , which sports a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Synaptics (SYNA) Goes on Restructuring Drive, Stock Plunges
Shares of Synaptics Inc. (SYNA - Free Report) fell over 10% on Friday after the company announced a series of restructuring changes. Per the SEC filing, the company will slash 9% of its workforce (or 160 employees) along with closing multiple offices to “align the company’s cost structure consistent with its revenue levels.”
Synaptics expects one time charges, to be recognized in the fourth quarter of 2016 and fiscal 2017, of approximately $10 million to $11 million as severance and one-time benefits and another $3 to $4 million mostly as lease cancellation charges and related costs.
Synaptics is primarily engaged in developing human interface solutions for a wide array of mobile computing and communications devices and is one of the leading suppliers of TouchPads to the notebook computer market. The company boasts Apple Inc (AAPL - Free Report) as one of its biggest clients along with Asian giants like Samsung, Huawei and Lenovo.
SYNAPTICS INC Price
SYNAPTICS INC Price | SYNAPTICS INC Quote
However, declining iPhone sales and overall softness in the high end smartphone market are proving to be a big impediment to revenue growth. In the third quarter of fiscal 2016, the company’s revenues were down nearly 16% year over year. Even the weakness in the PC business is wreaking havoc on Synaptics’ financial performance.
The company trimmed its fourth quarter outlook given the rapid demand decline from high end smartphone OEMs. The company expects revenues in the current quarter to be in the range of $300 million to $340 million, below $479 million registered in the year-ago quarter.
However, the company expects this to be a “temporary pause” in growth and expects things to improve in the second half of the calendar year.
We believe that the sluggish macro backdrop and no near-term respite for weakness in the smartphone market are unlikely to be counterbalanced by TDDI (Touch and Display Driver Integration) and fingerprint business opportunities.Though the company won a large number of contracts for its display driver and fingerprint authentication products, it will face significant pricing pressure in 2016. In the last few months, Synaptics has inked deals with Microsoft Corp. (MSFT - Free Report) , Xiaomi and Lenovo, among others.
Also, increasing competition, and the ongoing uncertainty in the Chinese economy can prove to be a headwind for the company as it derives a significant portion of revenues from the region.
However, analysts state that a buyout, speculations of which have been around for some time, should be a positive for the company. Also, a strong shareholder repurchase plan will cushion the company’s earnings. Moreover, strategic acquisitions like Renesas SP Drivers, which have greatly expanded its offerings, are added positives.
At present, Synaptics carries a Zacks Rank #5 (Strong Sell). A better-ranked stock in the same space is Amkor Technology, Inc. (AMKR - Free Report) , which sports a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>