One more for the record. - Herb
One-Day Wonder
Two Peas in an iPod
By Monica Rivituso Published: January 21, 2005
Synaptics (SYNA)
Share price as of Thursday's close: $30.23
Share price now: $36.81
Change: 21.8%
Volume: 10.7 million shares, daily average 885,300 shares
Last time this high: Dec. 1, 2004
52-week high: $40.00
52-week low: $13.32
Forward P/E before news: 35.6 (using First Call mean estimate of 85 cents for June-ending fiscal year 2005)
Forward P/E after news: 43.3
APPLE COMPUTER (AAPL) ISN'T the only beneficiary of the wildly popular iPod.
Synaptics (SYNA) saw its stock jump nearly 22% to $36.81 Friday following a blowout quarterly report driven in large part by demand for the digital music player. So far in 2005, the maker of customized interfaces for consumer electronics is sitting on an impressive 20% gain, putting the 3.6% decline in the Standard & Poor's 500 to shame.
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But cool technology has to have some decent financial results to garner attention on Wall Street (well, the late 1990s, notwithstanding). And Synaptics' third consecutive quarter of record results, released late Thursday, caught more than a couple of investors' eyes. The company earned $9.7 million, or 33 cents a share, in its fiscal second quarter ended Dec. 31, 2004, a whopping 178% increase from the $3.5 million, or 13 cents a share, pocketed a year earlier. The profit surge reflected robust demand for portable digital music players, higher-than-expected revenue growth and a greater percentage of sales from non-PC-related devices. Revenue rose 65% year-over-year to $56.5 million.
It's the sales mix that's most interesting. Revenue from outside the PC market accounted for 43% of total revenue, or $24 million. That's a more than 300% increase from the $5.5 million that non-PC sales accounted for in the year-ago quarter. The phenomenal growth of Apple's iPod played a big role, but other digital-music-player manufacturers, such as Singapore-based Creative Technology (CREAF) with its Zen Micro line of MP3 players, contributed as well. This improved sales mix goosed operating margins to 27.8%, outpacing the year-ago quarter's 16.7%.
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The company's strong quarterly performance and bullish outlook prompted analysts to rethink their profit estimates. Scott Barnum, an analyst at Credit Suisse First Boston, boosted his fiscal 2005 and 2006 earnings forecasts. For fiscal 2005, he expects the company to earn $1.10 a share, instead of 83 cents a share. And for '06, he now forecasts $1.30 a share, 26 cents more than his previous estimate.
While the popularity of MP3 players has definitely sweetened Synaptics' results, the company says it's also making inroads into the cellphone market. Handset manufacturers, always looking for that next application to cram onto a phone, are eyeing MP3 functionality. And Synaptics is working to secure a piece of this business.
"We continue to work diligently on our mobile initiatives and are in various stages of development and investigation with a number of mobile [original equipment manufacturers]," said Lee during Thursday's call. "As we move forward with these programs, we are increasingly confident of the value of that mobile touch solutions [can] provide this market. We are optimistic that we will be able to update you on more specific design activities in the mobile space within the next three to six months."
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