SWKS Skyworks Solutions Inc

We recently reiterated our Neutral recommendation of Skyworks Solutions (SWKS).

Skyworks continues to capitalize on three business segments − mobile Internet, vertical markets and analog components. Skyworks Solutions continues to consolidate its share across the mobile Internet spectrum.

This covers everything from net books and data cards to smartphones, and even entry level handsets. Demand for mobile Internet applications is exploding with the broad proliferation of smartphones, net books, note books, caplets and other forms of embedded wireless devices.

The colossal demand for smartphones continues to drive momentum for Skyworks, particularly at Nokia Corporation (NOK) and Apple (APPL). Skyworks has partnerships with all leading smartphone vendors such as Motorola Mobility (MMI), Research In Motion (RIMM) and Samsung. The market for smartphones is growing four times the growth rate of the traditional cellular handset.

Skyworks Solutions continues to benefit from the rising tide of increasing radio frequency (RF) content associated with the 3G and 4G Platforms. The company has partnerships with major OEMs that underscore the company’s success in gaining market share.

Beyond smartphones, growth will be propelled by high resolution tablets, USB modems, home networks and yet-to-be-introduced Internet connective devices. Skyworks Solutions stated that the tablet market can surpass 200 million units by the year 2014, creating an incremental billion dollar target market for the company. 

Another area of focus for Skyworks Solutions going forward continues to be home networking and automation solutions, which extends several of the company’s smart energy solutions into home and enables connectivity across a range of products including gaming consoles, set top boxes, printers, appliances, HDTVs, Blu-ray players and home security and monitoring systems. Skyworks aims to diversify its focus on new vertical markets and an expanded customer base.

Although we remain encouraged by the company’s recent performance, estimates have been static in the last sixty days. As of now, we maintain our Neutral recommendation ahead of the second quarter results (expected on April 28). However, we currently have a Zacks #2 Rank on Skyworks which translates into a short-term rating of Buy as we expect the company to deliver solid results in the upcoming quarter.

 
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