Skyworks Revenue up by 44% to $275.4 Million in F3Q 2010

Skyworks Solutions, an innovator of high reliability analog and mixed signal semiconductors enabling a broad range of end markets, has reported record third fiscal quarter 2010 results.
Revenue for the June quarter was $275.4 million, up 44 % year-over-year and up 16 % sequentially versus the company's guidance range of 10 to 15 % sequential growth.
On a GAAP basis, operating income for the third fiscal quarter was $53.5 million versus $21.5 million in the third fiscal quarter of 2009. GAAP diluted earnings per share for the third fiscal quarter was $0.19 compared to $0.11 in the prior-year period.  

"Skyworks is outpacing analog semiconductor market growth driven by momentum across mobile internet, smart energy and diversified linear products applications," said David J. Aldrich, president and CEO of Skyworks. "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." Skyworks’ Business Highlights :

"Based on specific program ramps and backlog coverage, we are forecasting $300 million in revenue, a 25 % operating margin and $0.37 of non-GAAP diluted earnings per share for the current quarter," said Donald W. Palette, VP and CFO of Skyworks. "Further, we expect to deliver sustainable growth and operating leverage from our current $1.2 billion annualized revenue run-rate and non-GAAP earnings base of nearly $1.50 per share."
Skyworks hosted a conference call with analysts to discuss its third fiscal quarter 2010 results and business outlook yesterday. The call was hosted by Aldrich, Palette, Liam Griffin, Senior VP, Sales and Marketing and Thomas Schiller, VP, Corporate Development.  

During the conference call, discussing manufacturing strategy and meeting demands, Aldrich commented, “Everything we’re producing now is 6”. So what happened is we converted, we took our 4” line, and I have to hand it to our operating folks – they actually converted to 6” while running the 4” at very high capacity utilization. You typically don’t see anybody do that. So I’m frankly pretty proud of the way the team operated and executed to that plan. And so when we flipped the switch to 6” or when we migrated to 6” the utilization was reasonably high and you saw no roll off in margin, in fact you saw an improvement – we see an improvement or accretion in margin.”
He added, “Now what we are doing is as demand increases we’ve got plenty of headroom capacity to go internally with this 6” HBT with relatively short lead time, equipment, and human resources or people. So we’re on that path. We see more margin expansion as we grow and we’re able to moderate how much we do internally versus how much we do outside.”
He noted, “We needed the 6” conversion because when you get the 6” conversion and rough water magnitude you get, each wafer produces a little bit more than 2x the number of dye. So we needed to do that. And now that we’ve gone to 6” we have the opportunity for a relatively small amount of capital to expand that further. We also have an ongoing relationship with an outside provider with a copy-exact process; we can ramp those folks as well. So I think from an HBT standpoint we are in very good shape.”
“As the industry goes to 1.6 billion handsets we have the capacity to produce what is even at our most aggressive unit volume increase and our share aspirations; when we factor both of those in on the aggressive side we have plenty of capacity. I don’t think that’s an issue. There is tightness of gallium arsenide supply elsewhere in the market but that’s not a concern of ours because we can do it internally”, he concluded.
With respect to handset revenue, Don Palette commented, “Handset revenue was in the 75% to 80% range. We wouldn't expect that percentage to change in the Q4. 2011.” He added, “The mix for the quarter, we’re now slightly more than half 3G versus 2G. We were 52% 3G and 48% 2G.“.
Aldrich added, “I also think we should point out that even within that 20% to 25% or 75% to 80% on the handset side, it really marks a big shift within the handset sector, which is we’re moving pretty dramatically away from the 2G segment more towards 3G. We’re seeing more 4G, more multi mode and highly integrated solutions with more content.”
Regarding mobile handsets, Aldrich added, “With respect to Nokia, this quarter they’re roughly a 10% customer. We’re very happy with that, we’re proud of that. And we have just begun to ramp into some of the segments where we haven’t previously participated. So we see ourselves rounding out that portfolio, and as we’ve identified in the past, continue to see sequential growth as we move from primarily being a 3G provider in the past to being lined out in their entire portfolio, we think sometime between now and 2011.”

The discussions also involved business in China. Liam Griffin remarked, “China is certainly an important market for Skyworks. We’re a big fan of that region. We've invested quite a bit in the ecosystem. We did see some choppiness in the account base there, and we serve up to 100 small OEMs in that market. There has been some choppiness; we think it’s righting itself right now and should improve as we get into the second half of the year to some degree.”
He added, “In addition to the traditional handset guys that we work with, we are seeing some very good progress across the infrastructure space, mainly with companies like WAWE and BTE; and as Dave noted we were awarded not only the technology award plus plaque but also some great business with WAWE over the last quarter.”
Griffin also said, “We mentioned on the call that we just launched the first commercial LP device, which is really in the form of a USB dongle provided by Samsung. That is a great model for what you may see. Now that device has an Edge FEM, several W CDA bands and actually three LTA bands. So quite a bit of content. We’re now looking at customers that are thinking about 2011, 2012 with as many as six different discreet devices that Skyworks can provide – two or three LTE, two or three WCDMA. So it is going to be a material gain in content for us and it’s also you know, quite challenge in terms of complexity and performance.”
Regarding smart meters, Aldrich commented “It’s been the fastest growing segment in our non-handset business. It’s right now about 20% of our non-handset business. Regarding CAPEX, Palette commented, “I would anticipate it’s going to be a level that you’ve seen in the past few quarters, in the $20 million to $25 million range. We don’t guide cash flow but that’s a number that is not out of the realm of possibilities for us.”
Playback of the conference call will be available until 9:00 p.m. Eastern time on July 29.