SWKS 3rd QTR CC notes
The quarter was as guided in the analyst meeting in June, although the revenue figure I was looking for ($130 mil) was exceeded by $7 mil (Combined AHAA/CNXT biz for QTR). I'm not going to repeat what was in the actual release, but point out what I felt was 'new' and relevant to SWKS.
CEO
Dave said they reduced management layers with the headcount reduction and grouped people together who were on projects to make the operation more efficient. (I assume the majority of this came from CNXT)
They are on a clear path to profitability, gained market share, and increased design activity on strategic platforms.
SWKS is leveraging products across their customer base/cross selling and aiming to grow their content in platforms and using their leadership in the RF front end (Switches/PA modules).
Dave said during the Q&A, that they are happy selling everything from switches to PA modules on up to full system solutions, as the margins are roughly the same, its the volume that counts in a fixed business like IC manufacturing.
SWKS is in "almost all" of MOT's GSM and CDMA handsets, including the V70, i330 and T193, experienced strong design activity with MOT and sales to MOT will grow sequentially this quarter.
Volumes on PA modules were up 17% sequentially in the 3rd QTR.
Has InGaP's for GSM/CDMA PA's, has a 4x4mm PA module, the smallest in the industry.
Sanyo now a CDMA win.
SWKS sells to WaveCom!
35 design wins for the DCR across 20 IDM's, very strong demand for the single chip DCR.
Samsung is SWKS' largest customer, in the A300, A400 and T200 phones, among others. Ramping to 12 platforms by the end of the year.
CFO
Cash at $91 mil, line of credit $100 mil, planning to sell 4 buildings for aprox. $40-$50 mil.
CAPEX to be below historical levels
Paul made a strong point that SWKS, just like AHAA, will have a keen focus on the balance sheet, and will manage SWKS the same as they did in AHAA. (Sweet!)
Backlog even stronger in July than June, near breakeven for the Sept QTR, profit in the Dec QTR.
Focusing on achieving positive cash flow.
$150 mil in revenues for next quarter, 90% of the quarter is booked.
Q&A
(Adam Harkness) Visibility into Dec?
-MOT, Samsung and ODM's strong
-Does not see inventory in the channel "at any level".
(CIBC) Top customers on $137 mil?
1) Samsung mid 30%
2) MOT 20%
3) ERICY, SONY and NOK were next, just below the 10% level
(CSFB) Unit growth?
-PA's and DCR's strong, getting higher $$$ content per phone
-ODM's are mid to high teens of the overall handset market, growing to 50% in 2-3 years. SWKS has strong relationships with the ODM's.
(PRU) Breakdown by products on $137 mil
- 50% RF front end
- 33% Si systems and RF subsystems
- 10-15% Infrastructure
- Handset market is 2/3 GSM, 1/3 CDMA, does not see a radical shift in these percentages
(Piper and others) Number of full systems?
-currently 6, but that will be going up. (They laughed as if they knew a secret. <bg>)
-Platforms are more predictable, thus visibility is good.
Long term outlook?
-Paul said they would be "very disappointed" if they didn't achieve 15% op margins in 18-24 months on a $1 billion annual run rate in revenue. (15% of $1Bil is $150 mil. On 138 mil shares outstanding, that is over $1 a share!!)
Fab utilization?
-Mid 60%, going to mid 70% going to 80%. They said they want to have spare capacity to meet 'quick turn' orders and be a supplier of choice, as they can always meet the volume demands of a customer.
Comments by competitors about taking market share from SWKS?
-Dave said "you've hit a nerve" and reiterated that SWKS is the one taking share and stated "Talk is cheap". (Go Dave!)
Mexical note?
-SWKS will have positive cash flow when the note comes due, will be selling assets, has cash/line of credit.
-Management is quite sensitive to dilution and will look and all other ways to pay off the note.
-Management didn't seem concerned about the note, they are confident that this issue will not impact the business and are focused on the competition.
A-M-S |
