Techwell Inc. Reports Operating Results (10-Q)
TECHWELL INC is a fabless semiconductor company that designs markets and sells mixed signal integrated circuits for multiple video applications in the security surveillance automotive and consumer markets. Techwell designs application specific products that enable the conversion of analog video signals to digital form and perform advanced digital video processing to facilitate the display storage and transport of video content. Headquartered in San Jose CA Techwell currently has operations in the U.S. Korea Taiwan China and Japan Techwell Inc. has a market cap of $193.7 million; its shares were traded at around $9.02 with a P/E ratio of 69.4 and P/S ratio of 2.8. Highlight of Business Operations: We sell our products to distributors that fulfill third-party orders for our products. We also sell directly, using independent sales representatives, to original equipment manufacturers, or OEMs, and to original design manufacturers, or ODMs. For the six months ended June 30, 2009, we derived 77% of our revenues from products sold to distributors and 23% from products sold to OEMs or ODMs. For the year ended December 31, 2008, we derived 79% of our revenues from products sold to distributors and 21% from products sold to OEMs or ODMs. Our gross margins have not historically been significantly different between sales to distributors and sales to OEMs or ODMs through orders procured by independent sales representatives. However, our operating profit on sales through orders procured by independent sales representatives can be less due to the payment of commissions to sales representatives which we record as sales and marketing expense.
We received an aggregate of 74% and 83% of our revenues from our ten largest customers for the three months ended June 30, 2009 and 2008, respectively. For the three months ended June 30, 2009, Lacewood International Corporation, or Lacewood, a distributor, accounted for 37% of our revenues. For the three months ended June 30, 2008, Lacewood and AV Tech Corporation, or AV Tech, accounted for 31% and 10% of our revenues, respectively. For the six months ended June 30, 2009, Lacewood accounted for 36% of our revenues. For the six months ended June 30, 2008, Lacewood and AV Tech accounted for 29% and 11% of our revenues, respectively.
We derive substantially all of our revenues from sales to foreign customers, particularly in Asia, which sales accounted for 96% and 98% of our revenues for the three and six months ended June 30, 2009 and 2008, respectively. The table below indicates the percentage of total revenues by geographic location for the periods indicated:
We received 50% and 31% of our revenues from China in the six months ended June 30, 2009 and 2008, respectively. The increase was primarily due to an increase in revenues from our security surveillance market, whose products were primarily sold to customers in China. We received 16% and 33% of our revenues from Taiwan in the six months ended June 30, 2009 and 2008, respectively. The decrease was primarily due to a decline in revenues from consumer markets, whose products were primarily sold to customers in Taiwan.
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