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The chip maker now expects sales of $180 million - $190 million, down from its previous guidance range of $200 million to $210 million. While the sequential decline is expected to be fairly broad-based across all divisions and most product lines, the weakness is primarily in Computation and Consumer Division (CCD) and Memory Products Division (MPD).
Both these business units were down sequentially in the fourth quarter as well due to lower Touch sales and inventory adjustments across the majority of wireless SRAM infrastructure customers.
Orders are also expected to be impacted by certain wire line and handset customers. Though the TrueTouch family of products was the biggest revenue generator for Cypress in 2011, they expect the demand for touch screens to decline in the tablet market. Additionally, Cypress sees lower-than-expected revenue from its distribution channels due to weak business in Europe and Asia.
Cypress also reduced its gross margin guidance to a range of 53% to 54% from its previous guidance of 54% due to lower factory utilization rates. Earnings per share for the first quarter are expected to be $0.08 to $0.11 versus the previous guidance of $0.15 to $0.18.
Cypress is a semiconductor company, offering high-performance, mixed signal, programmable solutions. The company reported revenues of $242.4 million in the fourth quarter of 2011, down 8.5% sequentially. Earnings were down 13.5% sequentially but were above the Street , driven by lower opex, a lower share count and a lower-than-expected tax rate.
The company’s advanced technology and momentum in new products has resulted in increased customer wins and management’s growth initiatives also make us optimistic. However, the macro environment and poor visibility related to order patterns remains a cause for concern.
Cypress operates in a highly competitive market. In the touch-screen market, the company competes with Atmel Corporation ( ATML - Analyst Report ) and Synaptics ( SYNA - Snapshot Report ) . Recently, Atmel also slashed its revenue guidance for the fourth quarter of 2011 to $384 million versus its previous guidance of $403 million and $422 million.
Currently, Cypress has a Zacks #3 Rank, which translates into a short-term Hold rating.
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