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Second Quarter: Semiconductors and the ‘Internet of Things Tsunami’

August 06, 2013 | About:
Sally Jones

Sally Jones

49 followers
Following a flat sector performance, semiconductors may have passed through the bottom of a cycle and are now expected to see a modest recovery. With the sun setting on the PC era, the age of infotaining cars and a multitude of new smartthings becomes a reality, semiconductors are needed more than ever. David Aldrich, president and chief executive officer of Skyworks Solutions, said it well, calling this unique situation “the Internet of Things tsunami.”

With over a hundred public semiconductor companies and galaxies of applications that require semiconductors, microchips and processors, the interest in this sector will remain robust but seasonal, according to the recent Semiconductors Report from The Wall Street Transcripts. Second quarter trading by billionaire Gurus seems to support that outlook. But no semiconductor company is an island unto itself. The success of semiconductor companies is tied to the success of their customers. For example, the success of Skyworks Solutions (SWKS), a revolutionary designer and microchip maker, is linked to the sales performance of its customers Apple, Samsung and others. Here’s an in-depth look at Skyworks, a relatively small semiconductor company compared to giant Intel and others.

Skyworks Solutions (SWKS)

Skyworks Solutions (SWKS) has a market cap of $4.58 billion, a P/E of 19.70 and a P/S of 2.74. Stock price for SWKS is down 16% in the last year, currently trading at $24.27 per share.

Headquartered in Woburn, Mass., Skyworks is a worldwide engineering and manufacturing company with facilities throughout Asia, Europe and North America. Skyworks Solutions, Inc. is known for innovation and makes high performance analog semiconductors and components used in a variety of applications, including automotive, broadband, cellular infrastructure, energy management, GPS, industrial, medical, military, wireless networking, smartphone and tablet applications. Skyworks is a key innovator in the digital car revolution. The company expects to saturate the infotainment car market by contributing to a digital communications feature in all cars.

Historical pricing:

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The company recently reported third fiscal quarter 2013 results for the period ending June 28, 2013, with revenue for the quarter of $436.1 million, up 12%, compared to $389.0 million in the third fiscal quarter of 2012. On a non-GAAP basis, operating income for the third fiscal quarter of 2013 was $111.9 million, or 25.7% of sales, up from $91.7 million in the comparable period a year ago. Non-GAAP diluted earnings per share for the third fiscal quarter of 2013 was $0.54, a penny better than the company’s guidance, and a 20% increase from the $0.45 in the third fiscal quarter of 2012. On a GAAP basis, operating income for the third fiscal quarter of 2013 was $84.3 million and diluted earnings per share was $0.34.

David J. Aldrich, president and chief executive officer of Skyworks, commented, “We are capturing margin-accretive content across a broad set of end markets spanning automotive, industrial, smart energy, home automation, medical, mobility and cloud computing. Leading customers within each of these targeted markets are increasingly requiring always-on connectivity and enhanced power efficiency which intersects with our core competencies. Our system-level innovations and scale advantages are translating into accelerating top line growth, margin expansion and, most importantly, returns well in excess of our cost of capital. Accordingly, Skyworks is well positioned to capitalize on the Internet of Things tsunami and to outpace the broader analog semiconductor market while increasing shareholder value.”

For the fourth fiscal quarter 2013, the company expects a strong second half in 2013, based on program launches and an expanding product pipeline. Donald W. Palette, vice president and chief financial officer of Skyworks said the company anticipates revenue of $475 million, gross margin expansion to the 44.0 to 44.5% range and $0.62 of diluted earnings per share, each on a non-GAAP basis.

Guru Action: In second quarter trading activity, Manning & Napier Advisors Inc. bought 3,094,130 shares at an average price of $22.16, for a gain of 9.5%.



Lee Ainslie , founder of Dallas-based Maverick Capital, is still top Guru shareholder with 8,954,954 shares. He last added to his position by 20.87% in the first quarter of 2013.

Intel Corporation (INTC)

First incorporated in 1968, Intel Corporation also makes semiconductor chips. The company develops advanced integrated digital technology products, mainly integrated circuits, for industries such as computing and communications.

Intel Corporation (INTC) has a market cap of $114.46 billion, a P/E of 12.10 and a P/S of 2.24. The stock price for INTC is down 14% over the last 12 months, and currently trading at $22.82 per share.

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Last month Intel Corporation reported second quarter revenue of $12.8 billion, operating income of $2.7 billion, net income of $2.0 billion and EPS of $0.39. The company generated approximately $4.7 billion in cash from operations, paid dividends of $1.1 billion, and used $550 million to repurchase 23 million shares of stock.

Intel’s new CEO Brian Krzanich commented, “Looking ahead, the market will continue buying a wide range of computing products…Intel Atom and Core processors and increased SOC integration will be Intel's future. We will leave no computing opportunity untapped. To embrace these opportunities, I've made it Intel's highest priority to create the best products for the fast growing ultra-mobile market segment."

Guru Action: In second quarter trading activity, Arnold Van Den Berg reduced his position by 12.94%, and losing 3.4% on 148,925 shares bought at an average price of $23.62.



Taiwan Semiconductor Manufacturing Co. (TSM)

Taiwan Semiconductor Manufacturing Co. (TSM) has a market cap of $87.28 billion, a P/E of 15.30 and a P/S of 5.20. The stock price for TSM is up 18% over 12 months, and currently trading at $16.66 per share.

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Guru Action: In second quarter trading activity, Ken Fisher reduced his position by 49.34%, after a long string of gains shown on his trading history since the second quarter of 2003. Fisher lost 9.6% on 16,693,256 shares sold at an average price of $18.42 per share. He currently holds 17,122,760 shares after the trade.



Guru Howard Marks added to his TSM position by 198.25% in the second quarter, buying 69,528 shares at an average price of $16.60 per share for a 9.9% loss.

Broadcom Corporation (BRCM)

Another semiconductor company, Broadcom Corporation (BRCM), has a market cap of $15.62 billion, a P/E of 18.70 and a P/S of 1.90. The stock price for BRCM is down 22% over 12 months, and currently trading at $26.77 per share.

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Guru Action: No second quarter trading activity is posted, but Steven Cohen is top Guru shareholder who added to his position by 6,594% in the first quarter of 2013. Cohen lost 21.6% on 1,795,058 shares bought at an average price of $34.14 per share. He currently holds 1,822,280 shares after the trade.



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About the author:

Sally Jones
Sally Jones writes about Real Time Picks. She says, "I truly enjoy watching the Gurus in realtime and telling their story."

Rating: 4.0/5 (8 votes)

Comments

M1 supply
M1 supply - 11 months ago
Interesting and thanks for the article.

I would like to add, where there's chips, there's software needed. The winner on your list will be the 1) Firm that has the most software integration capability, produced in-house. 2) The Firm that provides the most flexibility of integrating existing product line to currently available software in the market.

Please leave your comment:


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