10/17/2003 - Cypress Semiconductor Corporation (NYSE: CY) announced that revenue for the 2003 third quarter was $216.6 million, up 7% from prior quarter revenue of $203.1 million and 6% from year-ago third quarter revenue of $205.0 million. Pro forma net income for the 2003 third quarter was $11.1 million, resulting in diluted earnings per share of $0.08, compared with prior quarter diluted earnings per share of $0.03 and a year-ago third quarter loss per share of $0.03.
Including amortization of intangibles and other acquisition-related, restructuring and special charges and credits, Cypress posted a GAAP net income of $17.3 million for the 2003 third quarter, resulting in diluted earnings per share of $0.12, compared with the prior quarter loss per share of $0.10, and the year-ago third quarter loss per share of $0.45.
Gross margin for the 2003 third quarter was 49%, aided by a 1% benefit from the sale of previously reserved inventory. This compares with last quarter’s 3% benefit on a gross margin of 48%. Cypress ended the quarter with total cash (including cash, investments and restricted cash) of $319.3 million, after the payment of $328.4 million to redeem our convertible subordinated notes. The company also continued to generate free cash (cash from operations less capital expenditures).
Cypress President and CEO T.J. Rodgers said, “We are pleased to announce the third sequential, quarterly improvement in revenue and pro forma profit since the bottom of the 2001–2002 semiconductor recession in Q4 2002. Booking activity picked up during the quarter, allowing us to exceed our guidance and expectations twice. The book-to-bill ratio was 1.06, with all divisions posting a book-to-bill of greater than unity. The booking momentum has continued into early October. Backlog for the quarter grew by 18%.”
Rodgers continued, “Our recent growth appears to be the result of a broad-based recovery, with improvements and market-share gains in consumer, wireless and computation. Even the long-dormant networking business began to show a few signs of life, particularly on the enterprise side of the business. Historically low customer inventories and a narrowing of the gap between semiconductor supply and demand are prompting a change in customer purchasing habits. With unit demand continuing to improve, an increasing number of our products are experiencing longer lead times. We shipped 160 million units in the quarter, a record, beating the 157 million units we shipped at the peak in Q3 2000. If these trends continue, we believe there is a strong possibility that the modest recovery of 2003 will turn into a boom in 2004–2005.” (Click here to view Investor’s Business Daily editorial on the semiconductor market by T.J. Rodgers.)
Wide Area Network and Storage Area Network (WAN/SAN)
Revenue from the WAN/SAN segment, which accounted for 31% of third-quarter revenue, increased 3% from the prior quarter, aided by modest improvement in the enterprise side of the business. The segment posted a gross margin of 54%. We anticipate a moderate increase in end-market demand through the fourth quarter. With customer inventories at historical lows, this increase could translate into stronger segment performance. Segment highlights include:
Wireless Terminals and Wireless Infrastructure (WIT/WIN)
Revenue from the WIT/WIN segment, which accounted for 30% of third-quarter revenue, increased 10% from the prior quarter with a gross margin of 38%. The revenue increase is attributable in part to strength in the handset business and a continued shift to a higher-density SRAM product mix. New customers were a major contributor to our market-share gains. We anticipate WIT/WIN sales to be slightly higher in the fourth quarter, based on a continued improvement in unit demand. Segment highlights for the quarter include:
Computation and Consumer
Revenue from the computation and consumer segment, which accounted for 35% of third-quarter revenue, posted a gross margin of 49% and was up 7% from the prior quarter due to robust demand for clocks in PC and consumer applications. We expect flat revenue rather than the typical seasonal downturn in the fourth quarter. Segment highlights include:
Revenue from Cypress subsidiaries, which accounted for 4% of third-quarter revenue, was up 13% from the prior quarter. The subsidiaries posted a gross margin of approximately 71%. Cypress expects a continued improvement in subsidiary performance as new products generated by the group reach the marketplace. Segment highlights include:
Rodgers concluded, “We expect to grow and become more profitable in the fourth quarter. I said in last quarter’s report that ‘this feels like the beginning of a recovery.’ I still believe that, based on our growing backlog of $223.4 million. Consumer activity has carried the recovery so far. If the early signs of recovery in the communications business turn into a bona fide upswing, 2004 will be a strong year both for Cypress and the semiconductor industry.”
Cypress Semiconductor Corporation (NYSE: CY) is Connecting from Last Mile to First MileTM with high-performance solutions for personal, network access, enterprise, metro switch, and core communications-system applications. Cypress ConnectsTM using wireless, wireline, digital, and optical transmission standards, including USB, Fibre Channel, SONET/SDH, Gigabit Ethernet, and DWDM. Leveraging its process and system-level expertise, Cypress makes industry-leading physical layer devices, framers, and network search engines, along with a broad portfolio of high-bandwidth memories, timing technology solutions, and reconfigurable mixed-signal arrays. More information about Cypress is accessible online at www.cypress.com.
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: Statements herein that are not historical facts and that refer to Cypress’s plans and expectations for the fourth quarter of 2003 and the future are “forward-looking statements” involving risks and uncertainties, including but not limited to: the recovery, the expected increase in end-market demand for our WAN/SAN segment in the fourth quarter, the expectation of higher sales in the WIT/WIN segment in the fourth quarter, the expectation of flat revenue rather than the typical seasonal downturn in the fourth quarter in the computation and consumer segment, expected continued improvement in subsidiary segment performance, expected product availability dates, and expectations for 2004 to be a strong year for Cypress and the semiconductor industry. Actual results may differ materially from Cypress’s projections. Please refer to Cypress's Securities and Exchange Commission filings for a discussion of such risks.
Cypress, the Cypress logo and HOTLink are registered trademarks of Cypress Semiconductor Corporation. Ayama, Quad Data Rate, QDR, HOTLink II, FLEx72, RAM7, WirelessUSB, EZ-OTG, EZ-Host, Connecting from Last Mile to First Mile, and Cypress Connects are trademarks of Cypress Semiconductor Corporation. Programmable System-on-Chip and PSoC are trademarks of Cypress MicroSystems.
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