Several firms are commenting on Skyworks Solutions (NASDAQ:SWKS) after the co announced it is immediately ceasing its baseband operations and will focus completely on its core RF business:
- CIBC is saying they see this as a very positive move with management removing an underperforming asset that in their opinion would always be at a disadvantage to its much larger competitors.
Removing the baseband business will not only provide direct transparency to Skyworks' RF businesses, but will also remove a highly volatile business that took a disproportionate amount of resources (expected savings of $70M annually). FY07 EPS target was put at $0.55-$0.60.
Management's new FY07 top-line guidance of $820-$840M is above firm's previous estimate of $817.5M, which still included a contribution from baseband. They've already been looking for upside to their FY07 projections and believe there are enough design wins in place to support the outlook.
FIrm is raising their price target to $9 from $7; maintains SO.
- Merrill Lynch is somewhat more cautious saying they applaud Skyworks'decision to exit the baseband business and give credit to management for its cost cutting actions. While they expect the stock to trade up, given the nature of the wireless IC industry, secular trends in the company's end markets, and Skyworks' operating history, they see risk to management's FY07 outlook. The firm therefore maintains Neutral rating.
In an unusual move for an RF semiconductor company, Skyworks guided for full year revenue and EPS. Despite the good cost cutting news, the firm still has several concerns regarding Skyworks. TI is targeting its single chip phone, LoCosto, at the low-end handset market, which will likely erode SWKS' transceiver opportunity over the next few years. Also, they're hearing that the company could lose EDGE transceiver share at Samsung to Silicon Labs. Share loss at Nokia gives them concern as well, and they believe that the company's progress in 3G transceiver silicon is lagging.
Notablecalls: So, SWKS will most likely gap up and then at best hold the gains. Just as Merrill noted, the RF co's tend to overpromise and under deliver.
- CIBC is saying they see this as a very positive move with management removing an underperforming asset that in their opinion would always be at a disadvantage to its much larger competitors.
Removing the baseband business will not only provide direct transparency to Skyworks' RF businesses, but will also remove a highly volatile business that took a disproportionate amount of resources (expected savings of $70M annually). FY07 EPS target was put at $0.55-$0.60.
Management's new FY07 top-line guidance of $820-$840M is above firm's previous estimate of $817.5M, which still included a contribution from baseband. They've already been looking for upside to their FY07 projections and believe there are enough design wins in place to support the outlook.
FIrm is raising their price target to $9 from $7; maintains SO.
- Merrill Lynch is somewhat more cautious saying they applaud Skyworks'decision to exit the baseband business and give credit to management for its cost cutting actions. While they expect the stock to trade up, given the nature of the wireless IC industry, secular trends in the company's end markets, and Skyworks' operating history, they see risk to management's FY07 outlook. The firm therefore maintains Neutral rating.
In an unusual move for an RF semiconductor company, Skyworks guided for full year revenue and EPS. Despite the good cost cutting news, the firm still has several concerns regarding Skyworks. TI is targeting its single chip phone, LoCosto, at the low-end handset market, which will likely erode SWKS' transceiver opportunity over the next few years. Also, they're hearing that the company could lose EDGE transceiver share at Samsung to Silicon Labs. Share loss at Nokia gives them concern as well, and they believe that the company's progress in 3G transceiver silicon is lagging.
Notablecalls: So, SWKS will most likely gap up and then at best hold the gains. Just as Merrill noted, the RF co's tend to overpromise and under deliver.
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