Cypress Semiconductor (CY - Free Report) reported fourth-quarter 2018 non-GAAP earnings of 35 cents, beating the Zacks Consensus Estimate by 2 cents. The figure increased 25% on a year-over-year basis.
Revenues of $604.47 million surpassed the Zacks Consensus Estimate of $599 million. The figure reflects year-over-year growth of 1.2%.
Robust performance of wireless Internet of things (IoT), Memory Products Division (MPD) and the automotive sector aided the top line in the fourth quarter.
Quarter in Detail
Cypress witnessed year-over-year growth of 24% in design wins in the reported quarter, of which 37% were from new products. Notably, design win growth was driven by Microcontroller and Connectivity Division (MCD), which was up 32% year over year.
Moreover, proper execution of Cypress’ 3.0 strategy, which is focused on delivering embedded solutions for consumer, automotive and industrial customers of all sizes drove the results.
Management stated that 592 platforms are in production with Cypress USB-C solutions, up from 490 in the third quarter, which reflects the success of the company’s USB devices. Notably, Cypress expanded its connect and compute portfolio for consumer Internet of Things (IoT) and automotive applications and strengthened its software offerings.
Further, Cypress also announced the divestiture of its NAND business through a joint venture with SK Hynix system ic in October. Notably, the deal will help the company focus more on the automotive, industrial and IoT markets.
The company faced sluggish demand in key markets like Asia/Pacific region owing to the ongoing U.S.-China Trade war. This remains a macro headwind.
However, the company remains optimistic about its strengthening momentum across automotive and industrial market. Further, the company’s strong IoT applications are likely to drive its growth in the near term as well as in the long haul.
Top-line in Detail
By Business Unit: Cypress reports in two organized segments — Microcontroller and Connectivity Division (“MCD”) and Memory Products Division (“MPD”).
MCD: This segment generated $355.8 million revenues (58.9% of total revenues), down 0.4% year over year and 13.9% from the previous quarter. The figure underperformed the Zacks Consensus Estimate of $371 million due to the slowdown across various MCD business units. However, the decline was offset by auto MCUs and USB-C, which grew in low single digits sequentially. Notably, USB-C revenues increased 52% year over year. Further, robust strength in the company’s broad wireless IoT penetration is evident from the increase in non-Nintendo revenues, up 20% year over year. Notably, non-Nintendo revenues increased 20% year over year in the second half of 2018.
MPD: The segment generated $248.7 million revenues (41.1% of revenues), down 4.2% sequentially but up 3.5% on a year-over-year basis. Notably, the figure surpassed the Zacks Consensus Estimate of $228 million. The company suffered from weak performance of its NAND business owing to pricing pressure. NAND declined 32% sequentially due to oversupply and price declines. However, Cypress’ NOR products witnessed 7% sequential growth and average NOR density per chip increased 15% year over year. Robust performance of NOR and RAM products aided top-line growth within this division.
By End-Market: The company operates in four high growth markets — Industrial, Automotive, Consumer and Enterprise end markets.
Industrial: The company generated 20% of its revenues from this market, up 40 basis points (bps) sequentially and 250 bps year over year.
Automotive: This market generated 35.5% of total revenues, up 450 bps from the last reported quarter and 530 bps from the year-ago quarter.
Consumer: Cypress generated 25.2% of revenues from this market, down 680 bps sequentially and 690 bps year over year.
Enterprise: Cypress generated 19.4% of revenues from this market, up 200 bps sequentially but down 70 bps on a year-over-year basis.
Cypress Semiconductor Corporation Price, Consensus and EPS Surprise