Skyworks Misses by a Penny - Analyst Blog

Skyworks Solutions, Inc. (SWKS) posted a net income of $60.9 million or 32 cents in the first quarter of fiscal 2011, more than double from a net income of $28.0 million or 16 cents in the year-ago quarter. Excluding one-time items, but including stock-based compensation expenses, net income per share came in at 38 cents, missing the Zacks Consensus Estimate by a penny.

Revenues of $335.1 million were up 37% from the year-ago quarter and up 7% sequentially. The reported was slightly ahead of the management's guidance of $330 million – $335 million and beat the Zacks Consensus Estimate of $332 million.

Skyworks continues to benefit from strong underlying demand in the mobile Internet market driven by market share gains and new product ramps. The market for smartphones is growing by leaps and bounds – four times the growth rate of the traditional cellular handset. Skyworks continues to benefit from the rising tide of increasing radio frequency (RF) content associated with 3G and 4G platforms.

The products from Skyworks support all smartphone and tablet operating systems including Android, Symbian, Windows Mobile and others.  

Skyworks continues to gain traction on the network infrastructure side of the mobile Internet connection as operators install new base stations, new routers, and back-haul equipment to expand coverage of data services and prepare for next generation LTE deployments. As carriers like Verizon and AT&T accelerate their LTE plans, Skyworks expects a solid opportunity for growth in the coming years with its broad product portfolio.

Margins

Gross margin (excluding stock-based compensation expenses) improved to 44.7% from 42.2% in the year-ago quarter and 43.8% in the previous quarter. The improvement in gross margin was driven by improved product mix (comprising a larger percentage of higher-margin vertical markets and 3G solutions), and improved manufacturing efficiencies.

Operating margin came in at 27.7%, up from 21.3% in the year-ago quarter and 26.1% in the previous quarter.

Skyworks exited the fourth quarter with cash and cash equivalents of $450.7 million, down from $459.4 million at the end of the previous quarter.

During the quarter, Skyworks retired its $50 million of credit facility and repurchased approximately 800,000 shares at an average price of $23.15 per share.

Guidance

Going forward, Skyworks projects revenues of $310 million to $320 million in the second quarter of fiscal 2011, up 30% - 34% year over year and much better than the Zacks Consensus Estimate of $306 million. Gross margin is expected around 43.8%. Excluding stock-based compensation expenses and restructuring charges, EPS is expected at 39 cents per share.

Skyworks aims to diversify its focus on new vertical markets and an expanded customer base. We remain encouraged by the company's recent solid performance and upbeat guidance. Skyworks, which competes with RF Micro Devices(RFMD), and TriQuint Semiconductor, Inc. (TQNT), continues to outpace analog semiconductor market growth driven by momentum across mobile Internet, smart energy and diversified linear products applications.

Shares of Skyworks gained 0.40% in after-hours trading to close at $30.15 after losing 5.89% in regular trading. We currently have a Neutral recommendation on Skyworks with Zacks #2 Rank, which translates into a short-term rating of Buy, in anticipation of strong performance in the coming quarters. 

 
RF MICRO DEVICE (RFMD): Free Stock Analysis Report
 
SKYWORKS SOLUTN (SWKS): Free Stock Analysis Report
 
TRIQUINT SEMICO (TQNT): Free Stock Analysis Report
 
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