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Skyworks Solutions (SWKS - Analyst Report) reported a net income of $0.35 per share in the third quarter of fiscal 2012 (excluding acquisition-related charges but including stock-based compensation expense), in line with the Zacks Consensus Estimate. 
 
Reported net income was $49.3 million or $0.26 per diluted share, down from a net income of $51.5 million or $0.27 per diluted share in the year-ago quarter and the previous quarter. 
 
Skyworks reported revenues of $389 million in the quarter, up 9% year over year and 7% sequentially, surpassing management’s guidance of $383.0 million. Skyworks’s strategic diversification across OEMs and chipset partners is enabling the company to deliver consistent results despite the macroeconomic uncertainty.
 
The company continues to gain market share within adjacent vertical markets including automotive, medical, avionics, military, location services and broadband communications. Mobile internet growth continues to be healthy, driven by smartphones and tablets. 
 
The need for high-performance analog solutions is expanding into brand-new markets, such as medical, automotive, military and industrial, thereby fueling demand for broadband connectivity. In addition, RF content per device continues to rise driven by a remarkable increase in the number of LTE-enabled devices and a major smartphone upgrade cycle, beginning in the emerging markets. 
 
Margins
 
Gross margin came in at 43.2%, slightly down from 43.9% in the previous quarter and 44.9% in the year-ago quarter. Operating margin came in at 23.6%, down from 26.1% in the previous quarter and 27.4% in the year-ago quarter.
 
Skyworks generated $44 million in cash flow from operations and invested $31 million in capital expenditures. The company does not have any debt on its balance sheet as of now.
 
The company ended the quarter with cash and equivalents of $327.9 million, up from $307.4 million at the end of the previous quarter. 
 
Guidance
 
Going forward, management expects revenues between $415 million and $420 million in the fourth quarter of fiscal 2012. 
 
Gross margin is projected at around 43.0% – 43.5%. Management expects gross margins to improve as the company realizes synergies associated with the AATI acquisition along with margin benefit from their recent capital investments. Skyworks expects earnings per share of $0.50 in the fourth quarter.
 
We continue to maintain a Neutral recommendation on Skyworks. Nevertheless, we have a Zacks #1 Rank on Skyworks, which translates into a short-term rating of Strong Buy.

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