25 July 2010


Skyworks grows revenue 44% year-on-year to $275.4m

For its fiscal third-quarter 2010 (to end June), Skyworks Solutions Inc of Woburn, MA, USA, which manufactures linear products, power amplifiers, front-end modules and radio solutions for handset and infrastructure equipment, has reported record revenue of $275.4m, up 44% on $191.2m a year ago and up 16% on $238.1m last quarter (exceeding guidance of 10–15%).

Driven by momentum in mobile Internet and continued penetration into new vertical markets and a broad set of diversified analog applications, Skyworks also exceeded guidance for gross margin and operating margin.

On a non-GAAP basis, gross margin has risen from 40.5% a year ago and 42.3% last quarter to 43.3%. This is attributed to a product mix that increasingly includes higher-margin vertical markets and 3G solutions, volume ramp of new products, continued manufacturing productivity enhancements, product and yield improvements, and significant cost reductions.

Operating income has continued to rise from $28.6m a year ago and $48.7m last quarter to $63.5m. Correspondingly, operating margin has risen from just 14.9% a year ago to 23.1%, more than rebounding from a brief dip to 20.5% last quarter. Non-GAAP net income has risen from $27m a year ago and $44.2m last quarter to $58.7m. 

Cash and cash equivalents have risen from $370m a year ago to $390m. Although down from $411.5m last quarter, this is after spending $33m to retire another $20.4m of March 2012 convertible debt (leaving only $27m of convertible debt due in March 2012) and investing $25m in capital expenditure (as the firm expects a strong second-half ramp).

“Skyworks is outpacing analog semiconductor market growth, driven by momentum across mobile Internet, smart energy and diversified linear products applications,” comments president & CEO David J. Aldrich.

“The smartphone segment is poised to grow at 3–4x the 8–10% growth rate anticipated for the overall cellular handset market,” reckons Aldrich. “For Skyworks, this market is growing at an even faster pace, given our increasingly customized solutions and our strong relationships with leading OEMs along with the rising tide of analog content, as carriers and consumers shift to band-intensive 3G and 4G platforms,” he adds. “We’re shipping to virtually all cellular OEMs and smartphone providers.”

Also regarding mobile Internet, during the quarter Skyworks was selected to power Samsung’s 4G USB modem (the world’s first commercialized LTE device). Embedded wireless is a rapidly growing segment that is often overlooked, says Aldrich. Skyworks estimates that sales of USB modems, tablets, and mobile hotspots will rise at a compound growth rate of 83% from 50 million units in 2009 to about 250m by 2013. “This could prove conservative, given the opportunity to easily upgrade the world's online computers with 3G and 4G USB modems on top of this entirely new tablet category, which is off to a very strong start,” he comments.

“We continue to gain traction on the other side of the mobile internet connection as well within network infrastructure, as mobile operators begin to install new base-stations, routers, and back-haul network equipment to avoid network traffic jams and to preserve their highly profitable data service revenue stream,” says Aldrich. “To support this growth we’ve developed a portfolio of network infrastructure solutions that include attenuators, VCO synthesizers, mixers, low-noise amplifiers and demodulators,” he adds. 

During fiscal Q3, Skyworks unveiled new mid- and high-power front-end modules for multiple in/multiple out (MIMO) access points, routers and gateways; launched next-generation monolithic microwave integrated circuit (MMIC) amplifiers for infrastructure receiver applications; launched high-performance broadband synthesizers spanning ultra-wide frequency ranges to support the world's leading 3G and 4G base-station providers; started shipping attenuators and amplifiers for Cisco’s multi-room DVR in support of Verizon’s FIOS deployments; and ramped DBS solutions in support of DirecTV and Dish Network services.

Also, regarding new vertical markets such as smart grid, home & building and automation applications, during the quarter Skyworks ramped smart metering solutions in support of Itron’s OpenWay platform. According to a study by ABI Research, cumulative growth investment in smart grid will exceed $45bn in the next five years, as both government and utilities repair, upgrade, and transform their aging infrastructure. “After more than a decade, we see the home & building automation market gaining real momentum, given demand for green technologies, for enhanced security and energy conservation,” says Aldrich. “We’re providing ZigBee-based solutions for security monitoring and management,” he adds. Applications include lighting control, door and window sensors, as well as wireless appliance and temperature controllers. Customers include Honeywell, GE, LG, and Whirlpool.

Regarding diversified linear products, Skyworks says that its standard analog catalog business has over 2500 analog products and more than 1000 customers, with wide ranging applications including automotive, avionics, satellite, medical, military and industrial. As well as a diversified customer base, the business increasingly provides higher margins and long, almost annuity-like product life cycles, comments Aldrich.
“At a higher level, we believe that, by focusing on new end-markets, introducing margin-rich products and executing operationally, our revenue growth will translate into improving returns going forward,” he adds.

Based on specific program ramps and backlog coverage, for fiscal fourth-quarter 2010 (to end-September) Skyworks expects revenue to rise 9% to $300m, gross margin to rise to 43.5–44%, and a rise in operating margin to 25% (on track to achieve the firm’s medium-term operating model target). “Further, we expect to deliver sustainable growth and operating leverage from our current $1.2bn annualized revenue run-rate,” says VP & chief financial officer Donald W. Palette.

“Volume and scale will allow us to continue to expand margins,” says Aldrich, explaining that completion of Skyworks’ migration from 4” to 6” GaAs wafers gives plenty of headroom to increase margin through use of internal manufacturing capacity during what is expected to be a strong ramp up in second-half 2010. “There is tightness of GaAs supply elsewhere in the market but that’s not a concern of ours because we can do it internally.” In fiscal Q4, CapEx should be be roughly level with the last few quarters, at $20–25m, adds Palette.

See related items:

Skyworks’ PA module used in first commercial LTE device

Skyworks to increase outsourcing to GaAs foundry AWSC

Skyworks retires an extra $20.4m of principal convertible debt

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