SWKS Skyworks Solutions Inc

Skyworks Solutions (SWKS) reported a net income of 44 cents per share in the fourth quarter of fiscal 2012 (excluding acquisition-related charges but including stock-based compensation expense), beating the Zacks Consensus Estimate by a penny.

Reported net income was $61.6 million or 32 cents per share compared to a net income of $49.3 million or 26 cents per diluted share in the previous quarter and a net income of $64.2 million or 34 cents per diluted share in the year-ago quarter.

Revenues

Skyworks reported revenues of $421.1 million, up 4.7% year over year and 8.2% sequentially and surpassed management’s updated guidance of $420.0 million. For fiscal 2012, revenue of $1.6 billion grew 11% year over year.

Skyworks’s strategic diversification across OEMs and chipset partners is enabling the company to deliver consistent results despite the macroeconomic uncertainty.

Skyworks continues to capitalize on global mobile connectivity ubiquity and demand for high performance analog solutions across a diverse set of vertical markets. The company is rapidly expanding its footprint in complementary new verticals like automotive, medical and connected home.  Skyworks continues to gain market share in adjacent vertical markets like automotive, medical, avionics, military, location services and broadband communications.

Mobile internet growth continues to be healthy, driven by smartphones and tablets. The need for high-performance analog solutions is expanding into brand-new markets, such as medical, automotive, military and industrial, thereby fueling demand for broadband connectivity. 

In recent times, macro trends such as social networking, cloud-based content and the explosion of audio and video streaming continue to unify, thus driving increased semiconductor content and complexity in smartphones, tablets, ultrabooks and e-readers as well as within the supporting network infrastructure.

The global increase in mobile broadband phenomenon is slowly displacing traditional computing, which is further augmented by the entry of bigwigs like Google (GOOG), Amazon (AMZN) and Microsoft (MSFT). In addition, RF content per device continues to rise on the remarkable increase in the number of LTE-enabled devices and a major smartphone upgrade cycle, beginning in the emerging markets like China. 

Skyworks is actively participating in developing activities, which support major 2013 phone models that incorporate entirely new LTE bands like 9 and 10; 18, 19 and 38, 41,  to support deployments in Europe and Asia, which shall result in incremental addressable content.

Margins

Gross margin came in at 42.9%, slightly down from 43.2% in the previous quarter and 44.7% in the year-ago quarter. Operating margin came in at 24.6% versus 23.6% in the previous quarter and 27.2% in the year-ago quarter.

Skyworks generated $50 million in cash flow from operations and incurred $31 million in capital expenditures. The company does not have any debt on its balance sheet as of now.

The company ended the quarter with cash and equivalents of $307.1 million, down from $327.9 million at the end of the previous quarter. 

Guidance

Going forward, management expects revenues of approximately $450 in the first quarter of fiscal 2013, up 14% year over year and 7% sequentially, driven by new platform wins and design momentum.

Skyworks believes that its strategy of diversifying its business, expanding into new verticals and continued focus operational execution will drive growth even in a weak economic environment.

Gross margin is projected at around 43.0%. Operating expenses are projected to be $80 million. Management expects gross margin to improve as the company benefits from current capital investments and ramp up of margin accretive products like SkyOne, SkyHi along with its portfolio of high-performance analog products. Operating margin is anticipated to be approximately 25%. Skyworks expects earnings per share of 54 cents in the first quarter.

However, the results did not seem to impress investors as the company’s shares lost 5.61% in after hours trading to close at $22.73.

We continue to maintain a Neutral recommendation on Skyworks. Our recommendation is supported by a Zacks #3 Rank on Skyworks, which translates into a short-term rating of Hold.

 
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