Skyworks Swings to a Loss

But the chipmaker beats estimates excluding a charge of $90 million.
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Skyworks Solutions

(SWKS) - Get Report

fell into the red in its fiscal fourth quarter, but the company beat Wall Street earnings expectations excluding the restructuring charges.

The Woburn, Mass., chipmaker reported a net loss of $96.3 million, or 60 cents a share, for the three months ended Sept. 29, compared with net income of $3 million, or 2 cents a share, in the year-ago period.

Revenue in the fourth quarter totaled $193.1 million, vs. $190.2 million at this time last year.

Skywork's financial results included $90 million in charges related to its October announcement to

shutter its business that makes baseband chips for cell phones, as well as a $12 million noncash charge for international tax reorganization, and roughly $4 million in stock option expenses.

Excluding those charges, Skyworks said it earned $10.5 million, or 7 cents a share, 2 cents higher than the average analyst expectation according to Thomson First Call.

Similarly, revenue was affected by a $5 million restructuring reserve to account for distributor product returns involving the discontinued baseband chips.

On an operational basis, Skyworks said it generated sales of $198.2 million, in line with analyst expectations of $198.7 million and within its guided range.

Shares of Skyworks were up a dime at $6.40 in extended trading.

In an interview, CEO David Aldrich said that 1 cent of the EPS upside owed to a better mix of high-margin linear chip sales during the quarter, and that the other penny was the result of a tax benefit.

Revenue in Skywork's core analog and RF chips business increased 18% year over year, and 4% sequentially, the company said.

Additionally, Skyworks said it made progress selling chips for advanced, so-called 3G phones, including doubling its shipments of WCDMA power amplifiers sequentially and booking production orders to provide

Motorola

(MOT)

with front-end modules for certain of its high-end handsets.

While Aldrich echoed other chipmaker's recent concerns about the health of the cell phone market, describing the sector as "choppy," he said that overall unit sell-through was solid. He said there are scattered pockets of inventory building in the channel, depending on the customer.

"Some customers are white hot, others were looking to take more share than is materializing and are a bit soft," said Aldrich.

Skyworks pulled the plug on its baseband chip operations earlier this year, saying the business had not provided the growth engine the company had hoped for and that the large R&D investments required were a drag on the company's overall profitability.

The move will reduce Skyworks' staff by 425 and is expected to save the company $70 million in annual costs.

Skyworks said its gross margin will rise 1 percentage point in the fiscal first quarter under way, to 38.5%; EPS will surge to a range of 12 cents to 14 cents.

Analysts were looking for 13 cents EPS on sales of $199.4 million in the fiscal first quarter.

"We plan to achieve this financial performance with modest revenue growth in our core business, reflecting our share gains and new product ramps, as well as the realities of the broader market," said CFO Allan Kline in a statement.

Shares of Skyworks finished Wednesday's regular trading session down roughly 5%, or 33 cents, at $6.30.