Cypress Updates Third-Quarter 2013 Guidance

Cypress Semiconductor Corp. (NASDAQ: CY) today provided updated third-quarter guidance, as well as preliminary guidance on fourth-quarter business trends.

Brad Buss, executive vice president and chief financial officer said, “We are seeing greater than expected weakness in our mobile handset revenues, mainly within Asia, due to a customer push out of certain new handset programs to Q1, as well as order reductions at various end customers in China to balance inventory levels. Unfortunately this is resulting in a negative impact to Q3 revenue that was not anticipated in our original guidance.

Buss continued, “By geography, the weakness is mainly in Asia. By end market, the majority of the weakness is in mobile handsets and to a lesser degree in the PC market. Greater than 70% of our revenue traditionally has come from distributors and the final week of September is our largest week of the quarter, and, as such, our revised revenue estimates could vary significantly. Lead-times also continue to be near historical lows, reducing revenue visibility for Cypress and our distribution partners.

“Our preliminary, consolidated third-quarter 2013 financial results are now estimated to be:
  • Consolidated revenue of $184 million to $187 million, lower than our prior guidance
  • Non-GAAP gross margins of 53.5% to 54.0%, higher than our prior guidance
  • Non-GAAP operating expenses of $77 million to $78 million, lower than our prior guidance
  • Non-GAAP fully diluted earnings per share of $0.10 to $0.12, lower than our prior guidance
  • GAAP loss per basic share of ($0.11) to ($0.09), lower than our prior guidance

“While it is very hard to forecast the fourth quarter at this time, we believe the following trends will impact the fourth quarter: first, continued weakness in TrueTouch ®, specifically in mobile handsets, due to seasonal declines, customer program delays and end-of-life actions; second, the expected yearend inventory adjustments at certain end customers; and finally, slightly lower communications revenue impacting our Memory Products Division.

“As such, we expect that fourth quarter revenue could be down in the range of 9% to 11% sequentially from our revised third-quarter revenue estimate, in-line with our typical sequential fourth-quarter decline over the last two fourth quarters. We also expect our gross margin to decrease temporarily on lower factory utilization and our operating expenses to decline 4% to 6% sequentially due to lower variable compensation expense and continued tight operating expense management.

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