Skyworks Beats by a Penny

Skyworks Solutions, Inc. (SWKS - Analyst Report) posted a net income of $57.1 million or 30 cents per share in the first quarter of fiscal 2012 compared to a net income of $60.8 million or 32 cents per share in the year-ago quarter and a net income of $64.2 million or 34 cents per diluted share in the fourth quarter of fiscal 2011.

Excluding acquisition-related charges but including stock-based compensation expense, Skyworks reported a net income of 43 cents per share, beating the Zacks Consensus Estimate by a penny.

Skyworks reported revenues of $393.7 million in the first quarter, up 17% year over year and surpassed management’s guidance of $390.0 million.

Skyworks continues to weather the turbulent economic conditions well. The company has strategically positioned itself as a diversified company. Skyworks continues to benefit from strong underlying demand in the mobile Internet market driven by market share gains and new product ramps. Skyworks saw a healthy holiday season demand across all categories of mobile Internet devices, including smartphones, e-readers and tablets.

Margins

Gross margin came in at 44.3%, down from 44.7% both in the year-ago quarter and previous quarter. Operating margin came in at 26.7% versus 27.7% in the year-ago quarter and 27.2% in the previous quarter.

Skyworks generated $77.2 million in cash flow from operations and invested $6.4 million in capital expenditures. During the quarter, Skyworks repurchased 750,000 shares of its common stock and retired $9 million of debt. After December, Skyworks retired the remaining $17 million of its outstanding debt. The company does not have any debt on its balance sheet as of now.

Skyworks recently completed the acquisition of Advanced Analogic Technologies Incorporated for roughly $200 million in net cash. The company ended the quarter with cash and equivalents of $446.5 million, up from $410.8 million at the end of the previous quarter. 

Guidance

Ericsson recently projected a tenfold increase in wireless network data traffic over the next 5 years as the mobile Internet supplants the wired Internet. The ubiquitous use of smartphones is expected to drive growth further as analysts’ forecast that cumulative smartphone unit shipments will range around 4 billion between 2011 and 2015.

Another strong area of growth is tablets, which continues to replace PCs. Approximately 100 million tablets are expected to be shipped in 2012. Skyworks added that the adoption rate of tablets and similar devices like ultrabooks should accelerate as applications like cloud computing and digital textbooks become mainstream.

The advent of cloud computing is expected to take the trend further with the ever-growing need for wireless connectivity. The number of wireless radios shipped into non-mobile segments like gaming, PCs, televisions, set-top boxes is expected to grow at a compounded growth rate of 27% through 2015.

Meanwhile, high performance analog products also continue to see increase traction across a wide range of end markets. Management expects to see further growth in this segment with the acquisition of Advanced Analogic Technologies, which provides Skyworks with an entry into an incremental $2 billion in total available market with power management ICs, with display and backlighting solutions.

Going forward, management expects revenues of approximately $360 million in the second quarter of fiscal 2012. This includes roughly a $14 million contribution from the acquisition of Advanced Analogic Technologies. Gross margin is projected at around 43.0% – 43.5%. Management expects gross margins to improve in the third quarter as sequential revenue growth resumes and the company realizes synergies associated with the AATI acquisition. Skyworks expects EPS of 40 cents in the third quarter.

The better-than-expected results and guidance drove a 6.34% increase in share price in after-market hours trading to close at $20.45.

Read the full analyst report on SWKS