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Cypress Sells Minnesota Fab to SkyWater for $30 Million

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Cypress Semiconductor Corp. completed the sale of its Bloomington, MN based subsidiary to SkyWater Technology Foundry for $30 million. The subsidiary owns the company’s operational 200mm semiconductor manufacturing facility.

Following the news, the share price was up by more than 1%. Also, in the past one year, shares of Cypress outperformed the Zacks categorized Semiconductor Communications industry. While the industry gained 51.53%, the stock returned 63.30%.

Terms of the Deal

Per the terms of the agreement, the fabrication fab 4 in Minnesota will now be operated as a standalone business. The facility will continue to manufacture wafers for Cypress under a multi-year supply agreement. Additionally, it will also manufacture wafers for other semiconductor companies.

ATREG, Inc., which specializes in helping global companies to divest and acquire infrastructure and other assets, acted as Cypress' advisor in this operational fab sale.

The transaction allows Cypress to lower the cost structure and lend flexibility to its manufacturing model. The company can now increase the utilization of its Fab 25 in Austin, Texas, which will aid the company’s gross margins.

Bottom Line

Cypress has been in the process of transforming its manufacturing operations into a fab-light business model. The company has been taking steps toward streamlining its workforce and improving profitability in response to the challenging economic environment.

These actions include selling non-core wafer fabrication operations and consolidating or eliminating numerous product lines. Management believes that this move will improve its cost structure and unlock value.

Cypress President and CEO, Hassane El-Khoury, said “The sale of Fab 4 in Minnesota allows us to reduce our manufacturing costs as we exit the fab while using the proceeds to pay down debt. We will also be able to improve the utilization and efficiency of Fab 25 in Texas, into which we have been transitioning products over the last 18 months. We believe this agreement represents another milestone in our path to achieving higher gross margins."

Zacks Rank & Stocks to Consider

Currently, Cypress carries a Zacks Rank #4 (Sell). Stocks worth considering in the industry include Texas Instruments TXN, sporting a Zacks Rank #1 (Strong Buy) and Xcerra Corporation XCRA and Internap Corporation INAP, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Texas Instruments delivered a positive earnings surprise of 7.09%, on average, in the trailing four quarters.

Xcerra Corporation delivered a positive earnings surprise of 187.5%, on average, in the trailing four quarters.

Internap Corporation delivered a positive earnings surprise of 4.56%, on average, in the trailing four quarters.

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