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» Freescale Semiconductor's CEO Discusses Q2 2011 Results - Earnings Call Transcript
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Despite the pressure on the top line, we continued to improve gross margins. Let’s look at some of the key points. Revenues were $1.142 billion and that represented a decrease of 6.6% sequentially and were in line with the third quarter of 2010. Adjusted gross margins increased sequentially to 46.1%, a 50 basis point increase over Q2.This performance generated adjusted net income of $72 million compared to $70 million in Q2. Adjusted earnings per share were $0.29 compared to $0.33 in Q2, reflecting a higher share count in Q3. Now Alan will provide additional insights into our financial performance in Q3. I will then provide an update on some business highlights and our Q4 outlook, after which Alan and I will be happy to entertain your questions. Alan Campbell Good afternoon and thank you again for joining today’s call. As Rich said, Q3 was challenging, but we continued executing well on gross margins and cash. As I review the financials in more detail, please note that I will be focusing on the results excluding the impact of purchase price accounting and certain other items. We believe this to be a more meaningful representation of our ongoing financial performance. Let me now look at the third quarter in more detail. Revenues were $1.142 billion, representing a sequential decrease of 6.6%, which is in line with our preannouncement on September 26. Sales declined by half a point, or $6 million compared to Q3 last year. Microcontroller product sales were $395 million, 8% below the second quarter and 6% below the third quarter of last year. Automotive sales were down only modestly from the second quarter as expected, due to normal seasonality, [and did] increase over the same period last year. Sales of our MCUs into the industrial markets were considerably weaker than we forecast on both a sequential and a year over year basis due to weaker end demands. Networking and multimedia revenues were $292 million in the quarter, down 6% from Q2 and down 14% from last year.
Our networking revenues were negatively impacted by lower demand and pockets of elevated inventory in enterprise and wireless infrastructure markets. Our revenues in our consumer focused business grew from Q2 in line with normal seasonality.RF, analog, and sensor product net sales were $306 million, 3% below Q2 but 12% ahead of Q3 last year. Sequentially, our RF business was consistent with Q2 and above the same quarter last year. We continued to benefit from our strong position with all major carriers in the U.S., Europe, and Asia. Our sensor business was in line with Q2, and improved on a year over year basis, benefiting from our growing presence in consumer devices. Analog revenues declined from Q2 due to typical automotive seasonality. Our analog revenues increased over the same period last year. Cellular product sales were $97 million, down over 20% compared to the second quarter, and other products, which consist of primarily foundry sales and IP revenue, resulted in net sales of $52 million compared to $44 million in the second quarter and $30 million last year. Finally, sales to distribution decreased 13% sequentially and 7% compared to the same period last year, [unintelligible] the weakening trends, particularly in the industrial end market. Sequentially, distribution inventory was down slightly in dollar terms. Measured in units, inventories were at 11.5 weeks compared to 10.7 in Q2 and 8.8 last year. Our book-to-bill ratio in the third quarter was 0.9, compared to 1 in the second quarter. Looking at gross margins and operating expenses, we continued to make sequential and year over year improvements in gross margins. On a sequential basis, adjusted gross margin improved by 50 basis points. The higher utilization associated with our 150 mm fab transition was offset by much lower utilization of our assembly and test factories as we reacted to the weaker revenues that we saw in the latter part of the third quarter. Operational efficiencies including product yields, procurement savings, and lower depreciation more than offset the impact of lower sales. Read the rest of this transcript for free on seekingalpha.com