Q3 results: What analysts are saying
October 27, 2010 // Mark LaPedus
It's earnings season again. Here's what analysts are saying about the recent results:
ARM Holdings plc
Gary Mobley, an analyst with Benchmark, said: ''ARM reported Q3 FY10 revenue slightly above our estimates and consensus. Some of the revenue upside was a function of a favorable exchange rate. Non-GAAP EPS of $0.10 was essentially in-line with expectations. Similar to MIPS Technologies, ARM experienced solid Processor Division (PD) licensing trends, having signed 22 license agreements in the quarter (verses the average of 17). Also helped by Physical IP Division (PIPD) licensing, ARM's total backlog rose 10 percent QoQ. ARM PD royalty units, up 5 percent q/q, were essentially in-line with expectations. To compare, MIPS' royalty units were up 10 percent q/q.''
Atheros Communications Inc.
Craig Berger, an analyst with FBR, said: ''3Q revenues of $247 million (+4 percent QOQ, +57 percent YOY) were near its guidance low end. 3Q EPS of $0.67 was slightly below our $0.69 due to slightly worse revenues and greater operating expense spending.
As was expected, Atheros reported in-line 3Q results but guided 4Q below Street estimates (by 10 revenue points), neither better nor worse than feared from investors. Some positives include: (1) the firm's consumer revenues grew 56 percent QOQ in 3Q and should grow another 20 percent in 4Q as handset Wi-Fi designs with Samsung and others ramp more meaningfully, and as e-book readers and game consoles contribute materially; (2) 4Q likely represents the trough in PC chip shipments this cycle; and (3) combo chip efforts remain on track for some product releases in 2011.''
MIPS Technologies Inc.
Gary Mobley, an analyst with Benchmark, said: ''MIPS Technologies reported Q1 FY11 revenue and EPS well above consensus, guidance and our Street-high estimates. This time, the top-line beat was balanced between license and royalty revenue. Similar to last quarter, management issued what we feel to be comically conservative FY11 (June) revenue and EPS guidance. We believe it is mostly likely that MIPS can achieve FY11 non-GAAP EPS well above management's guidance of $0.47-$0.50.
The company reported Q1 FY11 (September) revenue of $22.5 million, 11 percent above our Street-high estimate and more than $2 million above the high end of management's guidance. The company posted $0.17 in non-GAAP EPS for Q1 versus our estimate of $0.12, consensus of $0.10 and management's guidance of $0.09-$0.10.
Management did increase revenue and EPS guidance for FY11. However, barring an unforeseen dip in the global economy, management's newest FY11 guidance should prove conservative for a few reasons. First, the company has some revenue backlog from the ISA renewal. Second, the company's license pipeline has improved further within the past 90 days. Last, the FY11 revenue guidance assumes a large 2H FY11 dip in royalty revenue, an unlikely event in our opinion.
Instead of management's newest $0.47-$0.50 guidance, we would not be surprised to see the company achieve FY11 EPS above our $0.52 estimate. Under a best-case scenario, the company could achieve FY11 non-GAAP EPS north of $0.60, similar to the run rate for the past two quarters.''
Hans Mosesmann, an analyst with Raymond James & Associates, said: ''SanDisk reported 3Q10 sales of $1.23 billion (up 4.3 percent q/q) towards the top end of guidance of $1.175-$1.25 billion and vs. our $1.21 billion (up 2.2 percent q/q) and consensus $1.24 billion (up 4.7 percent q/q). Strong OEM and retail demand drove the slight top line beat. GAAP/non-GAAP EPS of $1.34/$1.30 was well above our $1.06/$1.03 and consensus $1.01/$1.05 estimates driven primarily by the much higher than expected gross margin.
While ASPs (average selling prices) were down a modest 5 percent q/q in 3Q10, they weakened considerably in the month of September. Effectively, competitors introduced low-quality 3-bit per cell AND newer 2x nm NAND (presumably high-quality but not 'qualified' yet at major OEMs), disrupting the white label and wafer segments of the NAND market. We suspect this dynamic may take 1-2 quarters to normalize.
Outlook for ~4% q/q sales growth is below ours and consensus high-single digit expectations due to weaker macro issues in the U.S. and Europe and the dynamics explained above in the white label and wafer segments. Nonetheless SanDisk expects both retail and OEM sales to grow.
As we look into 2011 SanDisk should very likely enjoy success in the transition in the world of computing to solid state drives (SSDs) driven by tablets, notebooks and enterprise. However, management was hesitant to give a date on when it would proceed with its Fab 5 JV manufacturing volume ramp, which we think is prudent. Nonetheless, it's an indication that management is incrementally less bullish than we saw last quarter.''
Texas Instruments Inc.
Analyst Doug Freedman of Gleacher & Co., said: ''Texas Instruments delivered a beat and keep report. GAAP EPS was $0.02 above the Street at $0.71, as stronger than expected revenue and a more favorable tax rate and share count helped offset higher operating expenses. Revenue upside was attributable to strength in industrials, wireless communications infrastructure and smartphones.
Bookings only declined 8 percent in September, leaving open a possible shallow, soft landing as lead times shorten. Inventories still remain lean in the distributor channel. Revenue was up only 5 percent in analog (42 percent of sales), as the market quickly shifts from extended to normal lead times and resulting order pattern and customer inventory adjustments.
December guidance is for revenue of $3.36-$3.64 billion (down 2.5-to-10 percent), or $3.5 billion at the midpoint (verses our $3.57 billion and consensus $3.51 billion). EPS is guided to $0.59-$0.67, in-line with consensus at $0.63 (verses our more bullish $0.70).''
Craig Berger, an analyst with FBR, said: ''TI reported robust results and guidance that impressively were in line with Street estimates. Further, the firm's market commentary largely confirms our thesis that the chip industry is experiencing a "soft-landing" as chip shipments align with consumption rates, and with only modest estimate cuts this cycle.
Lead times declined by a few weeks on average, and management expects lead times should be back to normal levels exiting the year. Management said PC and computing shipments remain weak, while industrial shipments are weakening to more sustainable levels (still better than PC).''
Ultra Clean Holdings Inc.
Revenue for the third quarter was $118.5 million, an increase of 12 percent from the second quarter 2010 and an increase of 186.7 percent from the same period a year ago. The company recorded net income of $6.7 million, or $0.29 per share, compared to net income of $5.7 million, or $0.25 per share, for the second quarter 2010 and a net loss of $1.4 million, or minus $0.07 per share, for the third quarter of 2009.
Edwin Mok, an analyst with Needham & Co. LLC, said: ''UCTT reported slightly weaker-than-expected 3Q10 results and provided disappointing guidance. We believe a slowdown in the semi equipment industry has resulted in some order push-outs for UCTT that could extend into 1H11; however, we anticipate new gas panel business in the MOCVD sector to offset the weakness.''
C.J. Muse, an analyst at Barclays, said: ''December quarter revenues (were) at the mid-point were below consensus, (which) drove strong upside to 3Q EPS/4Q EPS guide. 4Q orders are expected to trend flat to up Q/Q, supported by China. VECO gaining momentum in traditionally AIXG accounts (Epistar, Lextar).
Management discussed delivery push-outs of ~10 tools into 1Q11 by Korea/Taiwan and the POTENTIAL for some facility-related revenue delays in China. While the bears will likely use this as support for an MOCVD demand roll-over, we would emphasize that: 1) Taiwan/Korea declines were already baked into our 2011 outlook; 2) expectations for strong China deposits in 4Q support our China-sustainability thesis; and 3) deposits plus lead-times provide strong visibility to management's positive 1H11 outlook.''
Volterra Semiconductor Corp.
Vernon Essi, an analyst with Needham & Co. LLC, said: ''VLTR reported Q3 revenue and EPS just below consensus and provided a soft Q4 guide that was better than feared, yet the midpoint of the revenue range was 12 percent below consensus.
Notebook was relatively in line with our $6 million estimate and server was 7 percent below our $29 million estimate. The Huron River (Notebook) ramp still looks to be on target with a Q1 ramp though Romley (Server) slipped from Q2 2011 to Q3 relative to the last quarterly call. Volterra has just over 80 percent backlog coverage in Q4 and has orders for delivery out into in Q1. All four product areas are expected to decline Q/Q. While the guidance is soft near-term, the longer term visibility picture is coming together nicely, especially for notebook. Furthermore, VLTR will likely meet its $20-$25 million range for notebook in 2010, albeit at the lower end, and still expects notebook revenue to double in 2011.
We lowered our 2010 revenue/EPS from $163 million/$1.56 to $156 million/$1.41 and our 2011 revenue/EPS from $190 million/$1.83 to $175 million/$1.60 and introduced our 2012 revenue/EPS at $203 million/$2.20.''
Dunham Winoto, an analyst with Avian Securities LLC, said: ''ZRAN posted Q3 of $99 million (+6 percent Q/Q)/$(0.02), largely in-line with our expectations of $101 million/$(0.04) and consensus. It appears that shipments for DTV (23 percent of total revenues) were mixed with high-end TVs offset by softer demand for entry-level TVs particularly at Tier-2 OEMs.
The outlook for Q4 is very disappointing with revs expected to substantially decline to $60-65 million (mid-point of -37 percent Q/Q), versus our forecast of $93 million and consensus of $95 million, respectively. While our expectations had been more modest than consensus, it seems that order rates for DTV continues to be quite lumpy and less robust than expected, which contributes to the weakness. Weak DTV shipments are further impacted by share loss at one OEM customer and also aggressive pricing moves by Tier-1 OEMs against ZRAN's Tier-2 customers.
We would however be more constructive if we can see evidence of at least one of the following: 1) ZRAN's ability to compete well with Taiwanese peers in DTV, 2) Traction in FRC via additional design wins, or 3) Return to consistent growth in DSC.''
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