Cypress Reports 12% Increase in Second Quarter Revenue

7/18/2003 - Cypress Semiconductor Corporation (NYSE: CY) announced that revenue for the 2003 second quarter was $203.1 million, up 12% from the prior quarter revenue of $181.0 million and up slightly from the year-ago second quarter revenue of $202.1 million. Pro forma net income for the 2003 second quarter was $3.4 million, resulting in a pro forma income per share of $0.03, compared with the prior quarter pro forma loss per share of $0.10 and the year-ago second quarter pro forma loss per share of $0.05.

Including amortization of intangibles and other acquisition-related, restructuring and other special charges and credits, Cypress posted a GAAP net loss of $12.4 million for the 2003 second quarter, resulting in a loss per share of $0.10, compared with the prior quarter loss per share of $0.27, and the year-ago second quarter loss per share of $0.23.

Cypress CEO T.J. Rodgers said, “We’re very pleased with our return to pro forma profitability and positive free cash flow (cash from operations less capital expenditures) this quarter. The sequential revenue growth of 12% in the second quarter included incremental sales from the Micron synchronous (networking) SRAM business we took over. Bookings and turns were strong all quarter, and we ended the quarter with book-to-bill greater than 1.0, even with the Micron billing considered. Backlog grew sequentially as well.”

Rodgers continued, “Gross margin for the 2003 second quarter was approximately 48%, aided by a 3% benefit from the sale of previously reserved inventory. Operating expenses (Research & Development; Sales, General and Administrative) as a percentage of sales, improved approximately four percentage points in the 2003 second quarter, aided by cost reductions and incremental sales. We ended the quarter with cash of $600 million, of which approximately $328 million was earmarked for the redemption of our convertible subordinated notes, which was completed shortly after the end of the second quarter.”

Wide Area Network and Storage Area Network (WAN/SAN)
Revenue from the WAN/SAN segment, which accounted for 32% of second-quarter revenue, increased 17% from the prior quarter, aided by the Micron SRAM transaction. The segment posted a gross margin of approximately 55%. The datacom market continues to suffer from demand weakness, which we expect to continue through 2003. We anticipate flat revenue in the third quarter. Segment highlights include:

Wireless Terminals and Wireless Infrastructure (WIT/WIN)
Revenue from the WIT/WIN segment, which accounted for 29% of second-quarter revenue, increased 2% from the prior quarter with a gross margin of approximately 36%. The increase in revenue is attributable to a slightly higher-density product mix and to the broadening of our customer base, which we believe resulted in some market-share gains. We expect WIT/WIN sales to be up in the third quarter of 2003, aided by seasonal trends. Segment highlights for the quarter include:

Computation and Consumer
Revenue from the computation and consumer segment, which accounted for 35% of second-quarter revenue, was up 18% from the prior quarter and posted a gross margin of approximately 48%. While PC clock demand was flat with the prior quarter, as anticipated, the sales of other consumer-related clocks and USB controllers grew briskly in the quarter, aided by a continuing increase in the USB adoption rate. We expect the computation and consumer segment sales to be up in the third quarter, aided by cyclically stronger demand for consumer products. Segment highlights include:

Cypress Subsidiaries
Revenue from Cypress subsidiaries, which accounted for 4% of second-quarter revenue, was up 6% from the prior quarter. The subsidiaries posted a gross margin of approximately 74%. The excellent gross margin was offset by the high operating expenses of the new ventures. As a group, the subsidiaries had a pre-tax loss of $8.0 million in the quarter. We expect revenue contribution from the subsidiaries to be up at least 15% in the third quarter. Segment highlights include:

Financing Developments
During the second quarter, Cypress issued $600 million of five-year convertible subordinated notes with a coupon of 1.25%. Each note is convertible into 55.172 shares of Cypress stock plus a cash payment of $300.00. The notes are callable at anytime on or after June 20, 2006. At anytime prior to maturity, Cypress may, at its option, elect to terminate the holders’ conversion rights if the closing price of Cypress’s common stock exceeds $21.75 (subject to certain adjustments) for 20 days out of a 30 consecutive trading day period. Cypress used approximately $400 million of proceeds to retire the company’s existing convertible debt as described below.

Simultaneous with the offering, the company purchased nine million shares of Cypress stock for approximately $95 million in order to reduce the potential dilutive impact of the offering.

The company also used approximately $49 million of the proceeds to put in place issuer call-spread options to potentially reduce the dilutive effect of the shares issuable upon conversion of the convertible notes. The call spread expires July 15, 2004. This transaction has the potential to reduce the number of shares outstanding by up to 12 million shares.

Cypress also called for the full redemption of its 4% convertible subordinated notes due February 2005. As of July 1, 2003, the entire $283 million principal amount of debt was retired.

Cypress called for the redemption of its 3.75% convertible subordinated notes due July 2005. As of July 8, 2003, all but approximately $70 million of the $186 million principal amount of debt was retired.

Between the redemptions and privately negotiated purchases, Cypress retired approximately $400 million of its existing convertible debt, consistent with its plans at the time of the recent $600 million offering. Cypress intends to retire the balance of the 3.75% convertibles at or before maturity, either from its cash balance or cash generated from operations through additional redemptions or other purchases.

On June 30, 2003, Cypress filed a resale Shelf Registration Statement on Form S-3 for the registration of the shares underlying the recently issued convertible debt. The registration statement will become effective upon approval by the Securities and Exchange Commission.

Other Developments
Cypress received the International Organization for Standardization (ISO) 9001:2000 certification, the newest and most demanding of the ISO 9001 standards. The certification covers all Cypress locations and underscores the company’s commitment to provide the highest-quality products and services to customers.

Rodgers concluded, “We expect to grow revenue sequentially in the third quarter of 2003, to continue to generate free cash and to improve our pro forma profitability. The economy is still struggling, but—after a false start in 2002—this feels like the beginning of a recovery.”

About Cypress
Cypress Semiconductor Corporation (NYSE: CY) is Connecting from Last Mile to First Mile™ 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 programmable microcontrollers. More information about Cypress is accessible online at

Cypress and the Cypress logo are registered trademarks of Cypress Semiconductor Corporation. No Bus Latency, NoBL, RAM9, Ayama, Cynapse, FastEdge, More Battery Life, MoBL2, R8, MicroPower, FailSafe, WirelessUSB, 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. Silicon Light Machines, Grating Light Valve, GLV and PyroFree are trademarks of Silicon Light Machines. Intel is a registered trademark of Intel Corporation. Sony and PS2 are registered trademarks of Sony Corporation.

Previous Page | News by Category | News Search

If you found this page useful, bookmark and share it on: