Maxim Integrated Products Inc. (MXIM, Financial) filed Quarterly Report for the period ended 2008-12-27.
Maxim Integrated Products Inc. designs develops manufactures and markets a broad range of linear and mixed-signal integrated circuits commonly referred to as analog circuits. The company also provides a range of high-frequency design processes and capabilities that can be used in custom design. Maxim Integrated Products Inc. has a market cap of $4.09 billion; its shares were traded at around $13.66 with and P/S ratio of 1.99. The dividend yield of Maxim Integrated Products Inc. stocks is 6.18%. Maxim Integrated Products Inc. had an annual average earning growth of 7.2% over the past 10 years.
During the three months ended December 27, 2008 and December 29, 2007, approximately 76% and 81%, respectively, of net revenues were derived from customers outside of the United States. During the six months ended December 27, 2008 and December 29, 2007, approximately 77% and 81%, respectively, of net revenues were derived from customers outside of the United States. While the majority of these sales are denominated in U.S. dollars, we enter into foreign currency forward contracts to mitigate our risks on firm commitments and net monetary assets denominated in foreign currencies. The impact of changes in foreign exchange rates on revenue and our results of operations for the three months ended December 27, 2008 and December 29, 2007 was immaterial.
Our gross margin percentage was 48.5% and 62.2% for the three months ended December 27, 2008 and December 29, 2007, respectively. The gross margin percentage for the three months ended December 27, 2008, as compared to the three months ended December 29, 2007, decreased primarily due to an increase of $19.2 million in stock-based compensation expense related primarily to the Company's purchase of under-water stock options from employees and expense related to the purchase of stock options that expired in October 2008 recorded for the three months ended December 27, 2008. Inventory write downs increased by $4.0 million during the three months ended December 27, 2008 as compared to the three months ended December 29, 2007. Inventory write downs were $12.2 million and $8.2 million for the three months ended December 27, 2008 and December 29, 2007, respectively. In addition, $12.0 million of accelerated depreciation expense was recorded for the three months ended December 27, 2008 due to our decision to ramp down and eventually close our wafer fab in Dallas, Texas during the third fiscal quarter of 2008, $1.9 million in expense associated with the under utilization of the Company's wafer fabrication facilities, and $1.9 million amortization expense related to the acquisitions of the Storage products division of Vitesse Semiconductor and Mobilygen Corporation also contributed to the gross margin decrease for the three months ended December 27, 2008. As a result of our declining revenues we expect factory utilization will continue to decline resulting in increased unfavorable impacts to our gross margins.
Our gross margin percentage was 53.8% and 61.7% for the six months ended December 27, 2008 and December 29, 2007, respectively. The gross margin percentage for the six months ended December 27, 2008, as compared to the six months ended December 29, 2007, decreased primarily due to an increase of $15.4 million in stock-based compensation expense related primarily to the Company's purchase of under-water stock options from employees and expense related to the purchase of stock options expiring in October 2008 recorded for the six months ended December 27, 2008. Inventory write downs increased by $3.8 million during the six months ended December 27, 2008 as compared to the three months ended December 29, 2007. Inventory write downs were $20.6 million and $16.8 million for the six months ended December 27, 2008 and December 29, 2007, respectively. In addition, $23.4 million of accelerated depreciation expense was recorded for the six months ended December 27, 2008 due to our decision to ramp down and eventually close our wafer fab in Dallas, Texas, $1.9 million expense associated with the under utilization of the Company's fabrication facilities, and $2.7 million amortization expense related to the acquisitions of the Storage products division of Vitesse Semiconductor and Mobilygen Corporation also contributed to the gross margin decrease for the six months ended December 27, 2008. As a result of our declining revenues we expect factory utilization will continue to decline resulting in increased unfavorable impacts to our gross margins.
Research and development expenses were $144.3 million and $138.3 million for the three months ended December 27, 2008 and December 29, 2007, respectively, which represented 35.1% and 25.6% of net revenues, respectively. The increase in research and development expenses was primarily due to increased stock-based compensation. Stock-based compensation increased by $10.6 million primarily due to the Company's purchase of under-water stock options from employees and expense related to the purchase of stock options expiring in October 2008 recorded for the three months ended December 27, 2008. Depreciation expense increased by $2.6 million primarily due to the Company's decision to cease testing operations in the United States resulting in a change in classification of equipment located in the United States now being utilized solely in research and development. These were offset by $8.5 million decrease in salary and related expenses primarily due to decreased salary and bonus expenses resulting from the decreased headcount and reduced anticipated profitability.
Selling, general and administrative expenses were $64.1 million and $41.6 million for the three months ended December 27, 2008 and December 29, 2007, respectively, which represented 15.6% and 7.7% of net revenues, respectively. The increase in selling, general, and administrative expenses was primarily due to increased stock-based compensation. Stock-based compensation increased by $12.4 million primarily due to the Company's purchase of under-water stock options from employees and expense related to the purchase of stock options expiring in October 2008 recorded for the three months ended December 27, 2008. Salary and related expenses increased by $4.9 million quarter over quarter primarily due to our field application engineers' involvement in selling and marketing of the Company's products relative to their involvement in research and development activities. In addition, the Company's $1.0 million employee loan impairment and $1.2 million loss on disposal of fixed assets contributed to the increase in selling, general and administrative expenses for three months ended December 27, 2008.
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Maxim Integrated Products Inc. designs develops manufactures and markets a broad range of linear and mixed-signal integrated circuits commonly referred to as analog circuits. The company also provides a range of high-frequency design processes and capabilities that can be used in custom design. Maxim Integrated Products Inc. has a market cap of $4.09 billion; its shares were traded at around $13.66 with and P/S ratio of 1.99. The dividend yield of Maxim Integrated Products Inc. stocks is 6.18%. Maxim Integrated Products Inc. had an annual average earning growth of 7.2% over the past 10 years.
Highlight of Business Operations:
Net revenues were $410.7 million and $540.0 million for the three months ended December 27, 2008 and December 29, 2007, respectively, a decrease of 23.96%. Net revenues for the six months ended December 27, 2008 and December 29, 2007, were $911.9 million and $1,064.1 million, respectively, a decrease of 14.3%. We classify our net revenue by four major end market categories: Computing, Consumer, Industrial and Communications. In the three and six months ended December 27, 2008 and December 29, 2007, net revenues for all four end markets decreased due to a decline in shipments. Net shipments from Communications, Computing, Consumer and Industrial markets decreased by approximately 12%, 34%, 29% and 13% for three months ended December 27, 2008 as compared to December 29, 2007, respectively. Net shipments from Communications, Computing, Consumer and Industrial markets decreased by approximately 3%, 23%, 13% and 6% for six months ended December 27, 2008 as compared to December 29, 2007, respectively. The Company expects that its consumer and computing end markets will continue to decline due to the normal seasonal declines compounded by the current macro economic conditions. The Company expects industrial and communications end markets to decline less than its overall corporate average due to the quarter ending March 28, 2009 being a strong seasonal quarter for the industrial market and by government stimulus packages placing emphasis on infrastructure build outs.During the three months ended December 27, 2008 and December 29, 2007, approximately 76% and 81%, respectively, of net revenues were derived from customers outside of the United States. During the six months ended December 27, 2008 and December 29, 2007, approximately 77% and 81%, respectively, of net revenues were derived from customers outside of the United States. While the majority of these sales are denominated in U.S. dollars, we enter into foreign currency forward contracts to mitigate our risks on firm commitments and net monetary assets denominated in foreign currencies. The impact of changes in foreign exchange rates on revenue and our results of operations for the three months ended December 27, 2008 and December 29, 2007 was immaterial.
Our gross margin percentage was 48.5% and 62.2% for the three months ended December 27, 2008 and December 29, 2007, respectively. The gross margin percentage for the three months ended December 27, 2008, as compared to the three months ended December 29, 2007, decreased primarily due to an increase of $19.2 million in stock-based compensation expense related primarily to the Company's purchase of under-water stock options from employees and expense related to the purchase of stock options that expired in October 2008 recorded for the three months ended December 27, 2008. Inventory write downs increased by $4.0 million during the three months ended December 27, 2008 as compared to the three months ended December 29, 2007. Inventory write downs were $12.2 million and $8.2 million for the three months ended December 27, 2008 and December 29, 2007, respectively. In addition, $12.0 million of accelerated depreciation expense was recorded for the three months ended December 27, 2008 due to our decision to ramp down and eventually close our wafer fab in Dallas, Texas during the third fiscal quarter of 2008, $1.9 million in expense associated with the under utilization of the Company's wafer fabrication facilities, and $1.9 million amortization expense related to the acquisitions of the Storage products division of Vitesse Semiconductor and Mobilygen Corporation also contributed to the gross margin decrease for the three months ended December 27, 2008. As a result of our declining revenues we expect factory utilization will continue to decline resulting in increased unfavorable impacts to our gross margins.
Our gross margin percentage was 53.8% and 61.7% for the six months ended December 27, 2008 and December 29, 2007, respectively. The gross margin percentage for the six months ended December 27, 2008, as compared to the six months ended December 29, 2007, decreased primarily due to an increase of $15.4 million in stock-based compensation expense related primarily to the Company's purchase of under-water stock options from employees and expense related to the purchase of stock options expiring in October 2008 recorded for the six months ended December 27, 2008. Inventory write downs increased by $3.8 million during the six months ended December 27, 2008 as compared to the three months ended December 29, 2007. Inventory write downs were $20.6 million and $16.8 million for the six months ended December 27, 2008 and December 29, 2007, respectively. In addition, $23.4 million of accelerated depreciation expense was recorded for the six months ended December 27, 2008 due to our decision to ramp down and eventually close our wafer fab in Dallas, Texas, $1.9 million expense associated with the under utilization of the Company's fabrication facilities, and $2.7 million amortization expense related to the acquisitions of the Storage products division of Vitesse Semiconductor and Mobilygen Corporation also contributed to the gross margin decrease for the six months ended December 27, 2008. As a result of our declining revenues we expect factory utilization will continue to decline resulting in increased unfavorable impacts to our gross margins.
Research and development expenses were $144.3 million and $138.3 million for the three months ended December 27, 2008 and December 29, 2007, respectively, which represented 35.1% and 25.6% of net revenues, respectively. The increase in research and development expenses was primarily due to increased stock-based compensation. Stock-based compensation increased by $10.6 million primarily due to the Company's purchase of under-water stock options from employees and expense related to the purchase of stock options expiring in October 2008 recorded for the three months ended December 27, 2008. Depreciation expense increased by $2.6 million primarily due to the Company's decision to cease testing operations in the United States resulting in a change in classification of equipment located in the United States now being utilized solely in research and development. These were offset by $8.5 million decrease in salary and related expenses primarily due to decreased salary and bonus expenses resulting from the decreased headcount and reduced anticipated profitability.
Selling, general and administrative expenses were $64.1 million and $41.6 million for the three months ended December 27, 2008 and December 29, 2007, respectively, which represented 15.6% and 7.7% of net revenues, respectively. The increase in selling, general, and administrative expenses was primarily due to increased stock-based compensation. Stock-based compensation increased by $12.4 million primarily due to the Company's purchase of under-water stock options from employees and expense related to the purchase of stock options expiring in October 2008 recorded for the three months ended December 27, 2008. Salary and related expenses increased by $4.9 million quarter over quarter primarily due to our field application engineers' involvement in selling and marketing of the Company's products relative to their involvement in research and development activities. In addition, the Company's $1.0 million employee loan impairment and $1.2 million loss on disposal of fixed assets contributed to the increase in selling, general and administrative expenses for three months ended December 27, 2008.
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