Chipmaker Maxim Integrated (MXIM, Financial) reported a significant 6% increase in its revenue in the fourth quarter. Its performance for the fourth quarter reflected a steady growth across its product portfolio for its primary businesses. However, the company experienced softness in its mobility business that pressurized its results for the quarter that failed to meet consensus estimates on both the top as well as bottom lines.
Strong results and an impressive outlook
Maxim Integrated for the fourth-quarter posted revenue of $642 million as compared to revenue of $608 million in the same quarter a year earlier. The consensus was estimating revenue of $650.5 million for the quarter. Also, its earnings of $0.43 per share were below the analysts’ estimates of $0.48 earnings per cents for the quarter.
Looking forward, the company provided soft guidance for the first quarter. It expects its revenue for the first quarter to be in the range of $580 million to $620 million while its earnings are estimated to be between $0.34 and $0.40 per share. The analysts on the other side forecast earnings of $0.51 per share on the revenue of $676.1 million. This soft guidance has let its share down by almost 11.2% to $29.25 aftermath.
However, the investors should consider this drop an opportunity to buy more of the shares as the stock has a lot of potential that should drive its growth in the future. Also, Tunc Doluca, president and chief executive officer, said, "Although our near-term outlook for mobility remains cautious, we are executing on our strategy to bring new integrated designs to the Industrial, Automotive, Communications and Data Center markets and to diversify our customer base in mobility."
Strong growth
The company is experiencing a strong adoption for its newest generation products under its mobility segment. The customers are now switching over from prior generation smart phones and tablets to new generation devices. The company expects its second-half to generate better results as the new generation products such as smartphone and tablets will hit the market in the remaining half of the year.
In addition, the company is aggressively executing its system integration strategy that should improvise its product portfolio and deliver better performance going forward. It is concentrating on various aspects of the customer such as lower power, simpler designs, superior performance and greater space efficiency in its products in various other markets like automotive, industrial, communications and data center.
Moreover, the company continues to witness strong traction in its large mobility customers for various design wins that should contribute to its top and bottom lines at the end of the year. Maxim Integrated remains on track to diversify the product portfolio of its mobility business in three ways that should propel its growth in the long run.
First, the company is intelligently expanding its technology offerings for mobile devices that should better leverage its mobility product portfolio. Its mobility portfolio will now comprise with power management, optical sensor, MEMS, audio amplifier and touch products. The company has launched its newest audio amplifiers that reveal superior sound quality with attractive space-saving design.
It also assists in extending the battery life and winning more designs in tablets for the company that should drive its growth in the coming years. In addition, the company expects its sensor market to enhance performance for its mobility segment as customers are switching over to the new generation sensors with innovative technologies.
Second, Maxim Integrated is also focusing on diversifying its customer base and go past its largest customer that includes Chinese manufacturers and in other leading OEMs. The company is also seeing strong market traction for its highly integrated power management solutions with one of its Chinese customers that should drive its results in the back half of the year.
However, the declining revenue from its leading customer remains a concern for the company as the customers are switching to the new generation integrated solution. It expects this transformation to affect its results in the first half of fiscal 2015 and tremendously improve its performance in the second half of the year.
Last but not the least, the company remains upbeat about creating new categories for portable and wearable devices that should drive its growth in the long run. The company believes that the wearable device is to play a major role in highly integrated, small form factor and low-power solutions that offers potential growth opportunity in the future.
Conclusion
The company is aggressively engaged in transforming its business to better serve the emerging needs of the customer that creates remarkable growth opportunity for company in the long run. So, investors should avoid the short-term pain and look at the long-term growth opportunity with the company. Moreover, the analysts have forecasted CAGR of 9.87% for the next five years that certainly reveals likely gains from the stock in the long-run.
