This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Supertex Customer Confusion

When there's a down side to having one major customer, claim you've got a new one.

That appears to be how Supertex (SUPX) hopes to avoid looking vulnerable to cost-cutting at Motorola (MOT).

Supertex -- a Sunnyvale, Calif., maker of LED chips -- has an enviable sweet spot as a keypad-light supplier for the Razr, Motorola's hottest phone. In the most recent quarter, sales to Motorola accounted for 22% of Supertex revenue.

But Motorola has been shaking up its supply chain and shifting to lower-cost or less lucrative parts. This has been crushing news to other Motorola suppliers like Multi-Fineline Electronix (MFLX), a contract manufacturer that buys Supertex's keypad lights.

Earlier this year M-Flex, as it is called, cut third-quarter guidance because its 80% customer -- Motorola -- was moving to lower-margin parts. M-Flex shares are down 72% from their late-March peak.

Worries about a similar fate have since hung over Supertex. Its stock is down 29% since its high in April, though it rose 6% to $33.69 Tuesday.

A comment by Supertex chief Henry Pao on last month's second-quarter earnings call seemed intended to tamp down worries about Supertex's dependence on its biggest customer.

"We have two over 10% customers ... well, we'll list those in the 10-Q, but we had two greater than 10% customers, GE (GE - Get Report) and Motorola," Pao said in response to an analyst's question, according to the July 25 Fair Disclosure Wire transcript.

Motorola's certainly no surprise, but listeners were a bit shocked to hear GE's name. Supertex had discussed growth opportunities in medical electronics, such as ultrasound gear. But GE hasn't been mentioned as a 10% customer in any recent filing.

Pao explains in an interview that when it came to writing up the first-quarter filing, a mere technicality kept GE's name out.

"The reason," says Pao, "is that 9.9% is the actual number. Our attorney reviewed it and said it wasn't 10%, so we couldn't put it in."

Curiously, Supertex has raised the prospect of GE as a big customer before. In a May 2005 earnings conference call, an executive said, "Actually, at the top of our list of customers are people like GE, in the medical world." But two years of filings show no mention of GE as a 10% customer.

To be sure, medical electronics represented about 35% of Supertex's total sales in the fiscal first quarter, and GE may in fact be a big buyer.

But Supertex's filings seem to contradict the rosy conference-call story about an exciting new 10% customer.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
SUPX $32.98 0.00%
GE $26.80 0.00%
AAPL $130.28 0.00%
FB $81.53 0.00%
GOOG $565.06 0.00%

Markets

DOW 18,080.14 +21.45 0.12%
S&P 500 2,117.69 +4.76 0.23%
NASDAQ 5,092.0850 +36.0220 0.71%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs