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Cypress Semiconductor Corporation (CY - Analyst Report) reported fourth-quarter 2012 loss of 2 cents per share, narrower than the Zacks Consensus Estimate of 8 cents loss per share. The adjusted earnings per share exclude one-time items, but include stock-based compensation expense. The tight operating expense control contributed to the upside in earnings.
Cypress reported revenues of $180.3 million, down 11.2% sequentially and 25.6% year over year due to sluggish demand in all the segments. Revenues were above the management’s preliminary guidance range of $177.0–$179.0 million.
In the reported quarter, the book-to-bill ratio increased to 0.88 from 0.81 in the third quarter.
Revenues by Segment
The Programmable Systems Division (PSD) segment, which generated 47.2% of fourth quarter revenue, consists of two divisions. The first is basically the old Consumer and Computation Division (CCD) segment, which has the TrueTouch, CapSense, Trackpads and Ovation businesses under its umbrella. The second division comprises the core PSoC business. The segment decreased 9.1% sequentially to $85.1 million due to normal seasonality in CapSense and lower PSoC and handset revenues, partially offset by little growth in Trackpads.
The Memory Products Division (MPD) segment generated 42.9% of revenue, down 12.3% sequentially due to lower-than-expected static random access memory (SRAM) revenue. This existing division continues to focus on four SRAM business units, general-purpose programmable clocks and process technology licensing.
The Data Communication Division (DCD) segment generated 9.2% of revenue, down 12.2% sequentially due to weak PC market and lower wireless revenues. This division has been realigned to focus solely on USB controllers, Wireless USB and West Bridge peripheral controllers for handsets, PCs and tablets.
The Emerging Technology Division (ETD) segment generated the remaining 0.7% of revenue, amounting to $1.3 million, down 43.5% sequentially.
Reported gross margin for the quarter was 46.4%, down 720 basis points (bps) from the year-ago quarter’s 53.6%. The decrease was due to unfavorable product mix, higher factory absorption charges, lower utilization and inventory reserves related to Ramtron acquisition.
Operating expenses of $98.6 million decreased 3.3% year over year from $102.0 million in the year-ago quarter. Reported operating margin was (11.0%), down significantly from the year-ago quarter. Research and development (R&D) expenses increased as a percentage of sales, as did selling, general and administrative (SG&A) expenses.
The quarter’s GAAP net loss was $24.2 million or loss per share of 17 cents, down from $31.7 million or 18 cents in the comparable quarter last year. Excluding special items but including stock-based compensation expense, non-GAAP net loss was $43.1 million or loss per share of 2 cents compared with earnings per share of 18 cents in the year-ago quarter.
Cypress exited the fourth quarter with cash, cash equivalents and short-term investments of approximately $117.2 million, down from $219.4 million in the prior quarter. Trade receivables were $82.9 million, down from $125.2 million in the prior quarter.
During the quarter, cash flow from operations was over $18.7 million, down from $58.1 million in the previous quarter. The company bought back 3.2 million shares of common stock for $32.3 million and also paid a quarterly dividend of $16.1 million.
Management expects first quarter 2013 revenue in the range of $163.0–$170.0 million (down 5%-9% sequentially) due to regular seasonality in PSD. MPD and DCD divisions will be flat to slightly down sequentially. The gross margin is expected to remain flat at 51%, which will vary with manufacturing product mix. Operating expenses are expected in the range of $82.0–$83.0 million.
Cypressis a semiconductor company, offering high-performance, mixed signal, programmable solutions. The company delivered a decent fourth quarter as it posted a narrower-than-expected loss.
In the quarter, company bookings increased across all divisions, indicating improving economy. However, the company guided lower revenue due to weak macro environment.
The company’s advanced technology, momentum in new products, increased customer wins and growth initiatives make us optimistic. However, a weak and uncertain macro environment and increased pricing pressure remain causes for concern.
Cypress has a Zacks Rank #5 (Strong Sell).
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