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ON Semiconductor Closes Aptina Buyout; Updates Q3 Guidance

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ON Semiconductor recently completed the acquisition of Aptina Imaging for $400 million in cash.

California-based Aptina Imaging manufactures high-performance CMOS image sensors for automotive and industrial uses. The company's sensors are also used in cameras, mobile devices, and computing and gaming platforms. According to the IHS Image Sensor Market Tracker, the company held approximately 6% of the $3.12 billion image sensor market in 2013.

The acquisition will strengthen ON Semiconductor’s already established high-speed, high-performance CMOS image sensor business. The strategic move aims to compliment the company’s existing image sensor products, especially designed to address the needs of general-purpose industrial and automotive image sensing applications, including machine vision, multiple cameras, digital cinema and motion analysis among others. Further, the deal will strengthen ON Semiconductor’s talent base with the addition of an experienced design and applications engineering team to the image sensor segment.

Management stated the financial results of the company’s consolidated sensor businesses, including Aptina Imaging and Truesense Imaging acquisitions and the existing optical, image and touch sensor businesses, will be reported under a new segment, beginning the third quarter of 2014.

Impact of Aptina Imaging Acquisition on Third-Quarter Guidance

For the third quarter of 2014, ON Semiconductor had guided revenues in the range of $765.0–$795.0 million. However, now the company expects Aptina Imaging to contribute $60–$70 million to the revenues. The deal is also expected to be slightly accretive to third-quarter non-GAAP net income. However, GAAP net income is expected to be negative due to costs related to restructuring, fair market value step-up of inventory, and other acquisition-related items.

ON Semiconductor is a leading supplier of image sensor products. The company serves a broad base of end-user markets, including automotive, communications, computing, consumer, medical, industrial, smart grid and military/aerospace.

In the last concluded quarter, ON Semiconductor reported revenues of $757.6 million, up 7.2% sequentially and 10.1% year over year. Reported revenues were above the Zacks Consensus Estimate of $755.0 million. Also, earnings of 20 cents beat the Zacks Consensus Estimate driven by higher revenues and solid cost cutting measures undertaken by management.

ON Semiconductor currently has a Zacks Rank #3 (Hold). Other better-ranked stocks that are performing well at the current levels include Mercadolibre, Inc. (MELI - Free Report) and World Energy Solutions, Inc. , sporting a Zacks Rank #1 (Strong Buy), and Garmin Ltd. (GRMN - Free Report) with a Zacks Rank #2 (Buy).

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