Silicon Motion Technology Corporation (SIMO - Free Report) recently completed the divesture of mobile communications business (FCI product line) to Dialog Semiconductor Plc. for $45 million. The divesture plan was announced in March this year.
The divested product line comprised of low power, multi-mode diversity LTE, mobile TV SoCs and battery-operated Wi-Fi products utilized in IoT. We believe that the sale of this unit will help the company to focus more on core SSD controllers and related solutions for client devices, data center and enterprise applications.
Notably in the last reported quarter (first-quarter 2019), Mobile communications product (which include mobile TV SoCs) sales were $5.8 million, representing 6% of total revenues, declining 26.6% year over year and 19.4% sequentially. Sales from mobile storage products (which include Embedded Storage and Expandable Storage products) declined 28% from the year-ago figure to $88 million. Revenues from mobile storage products contributed 99% to overall product revenues.
Consequently, the company is likely to manage its business better by shifting focus to Client SSD controllers segment and selling FCI product line.
During the first quarter, the company rolled out SM2271, enterprise SATA SSD controllers, featuring accelerated performance and high capacity capabilities, which is a positive.
Shares of Silicon Motion have gained 8.9% on a year-to-date basis, outperforming the industry’s rally of 5.7%.
Q1 Results Sneak Peak
Silicon Motion delivered first-quarter 2019 non-GAAP earnings of 42 cents per American Depositary Share (ADS), surpassing the Zacks Consensus Estimate by 8 cents. However, the figure declined 42.5% from the year-ago figure and plunged 48.8% sequentially.
Net sales (non-GAAP) declined 28% from the year-ago quarter and plunged 23.2% sequentially to reach $88.9 million. The figure missed the Zacks Consensus Estimate of approximately $95 million.
Silicon Motion outshines peers in providing resources for research and development. It develops affordable versions of TLC NAND flash and high-density 3D NAND. Moreover, the company’s robust liquidity position has enabled it to undertake diligent capital deployment initiatives that supplement long-term growth.
We also believe that an expanding product portfolio is a key catalyst.
Zacks Rank & Other Stocks to Consider
Silicon Motion sports a Zacks Rank #1 (Strong Buy).
Some other top-ranked stocks in the broader technology sector are Match Group, Inc. (MTCH - Free Report) , Universal Display Corporation (OLED - Free Report) and Autohome Inc. (ATHM - Free Report) , each flaunting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Match Group, Universal Display and Autohome have a long-term earnings growth rate of 15.2%, 30% and 20.9%, respectively.
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