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9 November 2009


Skyworks’ recovery strengthens, boosted by diversification, market-share gains and content growth

For its fiscal fourth-quarter 2009 (to end September), Skyworks Solutions Inc of Woburn, MA, USA, which makes linear products, power amplifiers, front-end modules and radio solutions for handset and infrastructure equipment, has reported revenue of $228.1m (80% from handsets and 20% from linear products).

Though down 2% on $232.6m a year ago, this is up 19% on the June quarter’s $191.2m (which itself was up 11% on the March quarter’s low of $173m). It also exceeds the guidance of $220-225m (which had been raised from $210m on 9 September).

Nevertheless, full-year fiscal 2009 revenue of $802.6m was still down 7% on fiscal 2008’s $860m (following the 10% and 18% sequential slumps in the December 2008 and March 2009 quarters).

After cutting staffing by 4% (150 employees) in the March quarter, operating expenses have been cut from $65.8m a year ago to $59.6m in fiscal Q4. Subsequently, on a non-GAAP basis, operating margin has risen from 15% last quarter to 18.6% and gross margin from 40.5% to 40.9% (up slightly on 40.8% a year ago). Skyworks attributes the increase to continued factory process and productivity enhancements, product and yield improvements, and double-digit year-on-year material cost reductions. Non-GAAP net income has hence risen from $27m last quarter to $41.8m (above $35.3m a year ago).

Skyworks says that its fab-lite manufacturing approach and leaner cost structure yielded full-year fiscal 2009 operating margin of 15.1% (exceeding 2008’s 14.1%) and net income of $116.5m (remarkably almost equaling 2008’s $117.4m).

Hence, despite the worst industry downturn in recent memory, cash flow from operations was $210m, including $70m in fiscal Q4. During the quarter, despite $15m in capital expenditure and retiring $17.4m of the $50m in 2010 convertible debt due on 1 March, cash and equivalents rose from $308m to $370m.

“Skyworks’ improving financial performance reflects the growing momentum of the mobile internet and increasing demand for always-on connectivity, particularly given the ubiquity of social networking applications and the proliferation of smart phones, notebooks, netbooks and embedded wireless devices,” says president & CEO David J. Aldrich. “We believe we are at the beginning of three powerful, multi-year waves including broadband access growth, infrastructure capacity expansion and smart grid implementations.”

During fiscal Q4, Skyworks supported the launch of a number of Android-based smart phones; started production in support of Intel wireless local-area networking (WLAN) reference designs for notebook and netbook devices; launched network infrastructure digital attenuators, voltage-controlled oscillators, synthesizers and mixers at Huawei, ZTE, Ericsson, Alcatel-Lucent and Nokia-Siemens; and ramped smart-grid solutions at Itron, ESCO, Neptune, Landis + Gyr and Sensus leveraging new ZigBee architectures. “We are entering a new and exciting growth phase which is positioning Skyworks to further differentiate and demonstrate even greater operating leverage,” adds Aldrich.

“Although we continue to remain cautious on the broader economy, based on our improving order visibility and backlog strength, we anticipate 13-15% year-over-year revenue growth for the first fiscal quarter of 2010 [to $238-242m] driven by mobile internet, energy management and diversified analog applications,” says VP & chief financial officer Donald W. Palette.

Assuming $240m in revenue, Skyworks expects non-GAAP gross margin to rise to 41.5-42%, and operating expenses of $51.5m, yielding operating margin of 20%. This achieves Skyworks’ previous targeted financial model of $240m in quarterly revenue, 42% gross margin and 20% operating margin.

Given its future product mix, gross margin improvements, and operating expense leverage, Skyworks says that it now sees a path to a new target operating margin in the mid-20s. “We believe this longer-term model is highly achievable and strikes the right balance between gaining market share, enhancing margins and, most importantly, maximizing free cash flow,” concludes chief financial officer Don Palette. In particular, Skyworks has been ramping up its 6-inch GaAs production line for several quarters, but Palette says that the firm plans full conversion from 4-inch wafers in mid-2010, boosting margins in second-half 2010.

See related items:

Skyworks’ revenue rebounds by 11% from March-quarter dip

Skyworks surpasses RFMD in power amplifier market share

Skyworks’ revenue shrinks 18%, but beats guidance

Skyworks generates $75m in cash flow despite 10% sales drop

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