Atheros Misses by a Penny - Analyst Blog

Atheros Communications, Inc. (ATHR) reported revenues of $238.2 million in the second quarter, more than double of $112.2 million reported in the second quarter of 2009. On a sequential basis, revenues were up 11% sequentially.
 
Atheros targets three markets – Networking, Personal Computing (PC), and Consumer. The growth in revenues was driven by strong demand from networking and consumer channels.
 
PC channel generated $67.4 million or 28% of total revenues, down 10% sequentially, as expected by management. The weakness in this market was primarily due to a slowdown in Europe. Management remains cautious in the near-term outlook for the PC market. However, in the long-run, Atheros remains upbeat about this market and is confident that ii is well positioned in this market.
 
Networking channel accounted for 54% of total revenues, up 17% sequentially. The growth in revenues was driven by continued strength from retail and carrier customers. Consumer channel contributed 18% and was up 41% sequentially.
 
Gross margin (excluding stock-based compensation and one-time items) came in at 49.8%, up from 47.4% in the year-earlier quarter and 49.5% in the first quarter. Operating margin came in at 22.6%, up from 10.8% in the year-earlier quarter and 21.4% in the previous quarter.
 
Net income came in at $29.7 million or 41 cents compared to a net income of $19.7 million or 27 cents in the previous quarter and a net loss of $0.3 million or $0.00 per share in the year-earlier quarter.
 
Excluding one-time items but including stock-based compensation, net income per share came in at 47 cents, missing the Zacks Consensus Estimate by a penny.
 
Atheros ended the quarter with cash, equivalents and marketable securities of $508.4 million, an increase of $64.8 million from the end of the previous quarter. The company has no long-term debt.
 
Going forward, Atheros expects revenues between $245 million and $255 million in the third quarter of 2010. Earnings per share are projected between 66 cents and 70 cents.
 
Acquisition of Opulan
 
Atheros also announced that it will acquire privately-held Opulan Technologies Corp. for approximately $72 million.
 
Opulan is a Chinese fabless semiconductor company which specializes in solutions for passive optical networking (PON) and broadband access aggregation (MUX). The company was founded in 2003 and employs 111 people. Oplulan serves leading Original Equipment Manufacturers (OEMs) addressing the growing networking market in China.
 
PON is expected to be a significant portion of the growing fiber-to-the-home (FTTH) market. The transaction will close in the third quarter and will be neutral to 2010 earnings.
 
The acquisition will further broaden Atheros’ capabilities in the networking market along with expanding its footprint in Asia.
 
Investors were clearly disappointed with the results. Shares of Atheros were down 7% to close at $28.36 in after-hours trading. In regular trading, shares were up 4.07% to close at $30.46.