Cypress Semiconductor (CY - Free Report) reported first-quarter 2013 loss of 5 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 the results.
Cypress reported revenues of $172.7 million, down 4.2% sequentially and 6.7% year over year. However, revenues were above management’s guidance range of $163.0–$170.0 million due to higher demand in all the segments, except the Programmable Systems Division segment.
In the reported quarter, the book-to-bill ratio increased to 1.04 from 0.88 in the fourth quarter of 2012.
Revenues by Segment
The Programmable Systems Division (PSD) segment, which generated 37.9% of first quarter revenues, consists of two divisions. The first is basically the old Consumer and Computation Division (CCD), with the TrueTouch, CapSense, and Ovation businesses under its umbrella.
The second division comprises the core PSoC business. The segment decreased 20.0% sequentially to $65.5 million due to normal seasonality in CapSense and TrueTouch business.
The Memory Products Division (MPD) generated 47.6% of revenues, up 6.0% sequentially to $82.2 million driven by nDP and Async. This existing division continues to focus on four SRAM business units, general-purpose programmable clocks and process technology licensing.
The Data Communication Division (DCD) generated 13.2% of revenues, up 13.0% sequentially to $22.7 million due to strength in the USP area and slight growth in Trackpads. 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) generated the remaining 1.3% of revenues, amounting to $2.2 million, up 75.0% sequentially. This start-up segment includes Cypress AgigA Tech Inc., Deca Technologies Inc., and all majority-owned subsidiaries of Cypress. The ETD division also includes the foundry business and other development-stage activities.
Reported gross margin for the quarter was 45.8%, down 380 basis points (bps) from the year-ago quarter’s 49.6%. The decrease was due to unfavorable product mix, higher factory absorption charges and inventory reserves related to the Ramtron acquisition.
Operating expenses of $94.7 million decreased 12.7% year over year from $108.5 million in the year-ago quarter. Reported operating margin was (16.9%), down 740 bps from the year-ago quarter of (9.5%). Research and development (R&D) expenses increased as a percentage of sales whereas selling, general and administrative (SG&A) expenses declined.
The quarter’s GAAP net loss was $28.2 million or loss per share of 19 cents versus $19.5 million or 13 cents in the comparable quarter last year. Excluding special items but including stock-based compensation expense, non-GAAP net loss was $77.8 million or loss per share of 5 cents compared with loss per share of 7 cents in the year-ago quarter.
Cypress exited the first quarter with cash, cash equivalents and short-term investments of approximately $101.6 million, down from $117.2 million in the prior quarter. Trade receivables were $132.6 million, up from $82.9 million in the prior quarter.
During the quarter, cash flow from operations was approximately $8.3 million, down from $18.7 million in the previous quarter. The company bought back just under 5 million shares and also paid quarterly dividend worth $15.8 million.
Management expects second quarter 2013 revenues in the range of $178.0–$186.0 million (up 3%–8% sequentially), driven by seasonality and new customer ramps in PSD, with Touch and CapSense being the biggest beneficiaries. MPD is also expected to increase slightly in the second quarter.
Gross margin is expected to remain flat at 51%, which will vary with manufacturing product mix. Operating expenses are expected in the range of $79.0–$80.0 million while non-GAAP earnings per share are likely to be in the range of 6 cents–8 cents.
Cypressis a semiconductor company, offering high-performance, mixed signal, programmable solutions. The company delivered a decent first quarter with a narrower-than-expected loss.
In the quarter, company bookings increased across all divisions, indicating improving economy. Also, the company guided higher revenues due to improving demand trends.
Though a weak and uncertain macro environment and increased pricing pressure remain concerns, we are optimistic on the stock given the company’s advanced technology, momentum in new products, increased customer wins and growth initiatives.
Cypress has a Zacks Rank #1 (Strong Buy).
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