This Day On The Street
Continue to site right-arrow
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
TheStreet Open House

Avoid Cypress Semiconductor

Stocks in this article: CY BRCM QCOM ARMH INTC AAPL NOK BBRY MSFT

NEW YORK ( TheStreet) -- At the onset of 2013, the Street expected a strong rebound in chip stocks. Although the industry did rebound from a weak 2012 to post 20% gains last year, it was nonetheless a disappointment, given that the sector (in aggregate) still trailed the 25% gains of the S&P 500.

So there's still a chance that things will only get better. But I'm still trying to reconcile the reason for the faith in Cypress Semiconductor (CY - Get Report), which has posted a three-year stock decline of 20% despite having a strong patent portfolio. The company has a well-diversified operation that, in some instances, surpasses both Qualcomm (QCOM) and Broadcom (BRCM). Management has failed to capitalize on these strengths.

With consistent outperformers like Qualcomm and ARM Holdings (ARMH) still leading the way, I understand why the Street has remained optimistic. I will even grant that investors' love for Intel (INTC) is justified, given the company's mobile advances.

But Cypress has struggled to grow since picking off rival chip company Ramtron International almost one year ago for $110 million. There was a lot of speculation as to what Cypress was thinking when the deal was announced. Given Ramtron's capabilities in non-volatile memory chips and mobile, I believed the acquisition made sense. But these predictions were only partly correct.

Today, with the stock still under pressure and a business that has seemingly gone nowhere in three years, I believe it's time for a drastic change, especially since the company's management has been unable to execute on all the "potential." With the company due to report fourth-quarter earnings on Thursday, management will have to wear magician hats to make the Street see what really isn't there -- that Cypress can be a long-term outperformer.

The Street will be looking for 8 cents in earnings per share on revenue of $166.3 million, which would represent year-over-year revenue decline of almost 8%. As low as these numbers may appear, I don't see how the company will be able to meet these targets, given Cypress' weakness in mobile computing and in Asian markets. Plus, there are still significant operational deficits management is working to overcome related to the Ramtron deal.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link 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

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
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!

Markets

DOW 17,310.22 -106.63 -0.61%
S&P 500 2,006.13 -15.12 -0.75%
NASDAQ 4,666.7070 -16.70 -0.36%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs