Maxim Integrated (MXIM, Financial) ended fiscal 2014 on a soft note. The company released mixed results for the recently reported fourth quarter. Although Maxim posted an improvement of 6% in the revenue, its results led to a decline in the share price. Investors had been expecting a better performance from the company. The softness in the performance was on the back of poor chip sales for mobile devices. Another reason behind the downfall was the cautious outlook for the future. However, management still is expecting better results on the back of some strategic moves that it is undertaking. Let us have a look at the underlying business.
Can Maxim come out of the disappointment?
Maxim posted 6% growth in the revenue to $642.47 million. The growth was impressive but it failed to meet the consensus estimates who on the other hand were expecting the top line to clock $651 million. On the earnings front, Maxim posted EPS of $0.43 which again missed analysts’ estimates. For the earnings, the analysts had been modelling $0.48 per share.
It was quite disappointing for Maxim to end fiscal 2014 on a soft note. The company was impressive in the stock market in the past. But the softness that Maxim saw on the back of weak chips sales for mobile device eroded its market share. The investors are always interested in the high-flying stocks and Maxim’s cautious outlook might have scared few investors away from the stock.
However, it is not always good to make a hasty move as the company can also be a good long-term holding as it is undertaking a number of strategies which are expected to help Maxim gain market share.
Maxim has a system integration strategy that is strengthening Maxim’s portfolio of products. The company is seeing positive signs from this strategy and expects a strong performance by its portfolio in the future. Seeing the growing consumer market and the positive trends that it is observing it feels increasing system level innovation. It is also seeing new content opportunities in new smart phone platforms, tablets and growing category of wearable.
Focused on the future
Maxim is focused about the future market movement. The company is expecting weakness in the major markets including its leading customer with its latest flagship smart phone. On a defensive move the company has posted a lower than expected outlook. It might be disappointing for the investors but this move reflects a cautious and prudent approach by Maxim.
The company is well aware that it can lose market share due to thi,s but it also has defensive moves to come over it. Maxim is counting on the rampup of a new smart phone at its leading customer where it expects to have increased the content over the prior generation.
Besides this, Maxim is seeing several design wins at other large mobility customers, and it is expecting it to contribute meaningful revenue all year with the existing platforms and new category of customer products. Maxim also has plans to diversify its product exposure. It is expanding its technology offering for mobile devices.
Further, in the mobility segment Maxim is seeing the largest growth potential in sensor. It is seeing good customer attraction for new use cases that combine sensors with other technologies. In addition, Maxim is also diversifying its customer base with Chinese and in other leading OEMs. With the fast growing portable and wearable devices the company is well positioned to create new opportunities for them. This segment is expected to prove a growth driver for Maxim in future.
In mobile payments, Maxim is sampling a new highly integrated system-on-a-chip product, which has been well received by several customers. It is well positioned as more stringent security standards for financial terminals get deployed in the U.S.
Conclusion
The company’s strengths can be seen in multiple areas, such as its revenue growth and a solid performance during the last one year. All these points indicate that that the stock is growing. So, from an investment point of view, investors should definitely consider Maxim Integrated in their portfolio.
