AMCC APPLIED MICRO CIRCUITS (AMCC: $17) 7/19/01
Reports 1QF01, Believes It's The Bottom
Annual EPS Prev. EPS
3/03E -0.09
3/02E -0.18
3/01A 0.48
Rating: BUY 12-Mo. Target: $18
AMCC reported 1QF2002 results in line with its pre-announced guidance. Revenue of $41.2M declined 66% Q/Q (vs. $40-45M guidance) and an EPS was a loss of $(0.05), also in line with guidance. Gross margin of 54% declined from last quarter's 73%, which AMCC attributed to lower utilization of both internal wafer fabs and test operations due to decreased demand.
Net bookings for the quarter were a shocking $1.0M, and AMCC noted cancellations remained significant as inventories were absorbed at a slower rate than expected. 90-day backlog was $42M, with the backlog from top 10 customers at just $16M, implying flat 2Q02 growth.
We believe AMCC's fundamental business model continues to change, with a greater percentage of revenue derived from line cards vs. sales into full system boxes. As a result, we believe it is more than likely AMCC's long-term margin level will be closer to the high 60% range as OEM price elasticity has become more sensitive in this current ROIC-centric environment.
AMCC's revenue mix also continued to shift toward metro-related products—a year ago, 23% of AMCC's revenues were from the metro segment, vs. this quarter's 63%.
While revenue will come in better than we had thought a month ago, accelerating ASP erosion and higher operating expenses over the course of the next several quarters will pressure results. Lowering estimates again: for FY2002 EPS is now $(0.18) on revenue of $172M; FY2003 EPS reduced to $(0.09) on revenue of $255 million.
While AMCC remains one of the better positioned suppliers for the metro and line card markets, its high valuation (18.6x on an enterprise value/CY02 sales multiple) and limited visibility to new orders is likely to keep it in a tight trading range for the near term. Maintain our 12-month Buy rating.
From CSFB. |
