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conference date: November 2, 2006
for quarter ending: September 30, 2006 (3rd quarter)
Overview: No surprises. Revenue decline mainly because of sale of French unit. Limited financial numbers because of ongoing accounting investigation.
Basic data:
Revenues of $443 million declined 5% sequentially but were up 6% from Q3 2005. Compensating for sale of French subsidiary, revenues were "on target sequentially" and up 10% from the prior year.
Cash and equivalents ended at $484 million. That is up $174 million, mainly from sale of subsidiary.
Guidance:
Revenue to decline sequentially 3 to 8%. Excluding Grenoble effect, decline to be 0 to 5%.
Conference Highlights:
Grenoble, France subsidiary was sold for $140 million. Product releases were recapitulated.
Revenues at midpoint of August guidance.
Revenues by segment: ASICS 31%, Memory 21%, Microcontrollers 25%, Automotive & RF 23%.
Repeated that options dates were found to be incorrect and will lead to material, but non-cash, restatements of past numbers.
RF and automotive sales up 3%. Microcontrollers down 3% sequentially, but up 45% year-over-year. ASIC (application-specific ICs) flat. Non-volatile memory down less than 1%.
Microcontroller inventories are now in balance. Expect smart-cards to rebound in Q4. Business remains healthy and continues to enhance productivity.
Q4 business climate is challenging.
Q&A:
Transition to Asia? MCU tests still done at San Jose. Moving to asia in next 3 to 6 months.
Front-end manufacturing? 95% of wafer is sourced in-house. Plans to expand sourcing through outside foundries in 2007.
Inventories? Have risen a bit. Does not expect them to climb dramatically.
Q4 by segment? Most segments expected to be flat. BiCMOS foundry to decline, which has been forseen.
Qualcom business in BiCMOS? Beliefs of rapid BiCMOS decline are overly dramatic.
Gross margins? 32.4% in Q1, is getting better over last 2 quarters, maybe around .8% per quarter, excepting any stock option charges. 2007 gross margins target is to improve .8% per quarter.
Depreciation was $55 to 56 million.
Looking at how to redeploy engineering resources, including to microcontroller business. Evaluating segments for best return on resources. Looks at offers, but so far believes best returns are through internal development.
Smartcards? Dataflash is down double digits sequentially due to capacity restraints. Smart cards were down seasonally and expect to rebound.
Pricing? Goes down consistently but slowly.
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Disclaimer: Our analyst summaries may include both our condensations of statements made by company representatives and our own analysis. They are not covered by any warranty. We cannot guarantee anything said by company representatives is true. We try not to make errors, but its possible. Before making or terminating an investment you should always verify any factual basis of your decision.
Copyright 2006 William P. Meyers