UBS Investment Research
First Read: Cypress
2Q: EPS Beat on Much Better Gross Margin
2Q09 Results – Missed revenue but beat gross margin, EPS. Neutral
Cypress reported sales/EPS of $155.8m/-32c (-3c non-GAAP), vs UBS at
$159.5m/-38c (-7c non-GAAP) and consensus at $151.4m/-10c non-GAAP. Non-
GAAP gross margin was 44.2% a 950 bps sequential improvement (+1,230 bps
GAAP) on higher wafer fab utilization (59%), better mix and lower product costs.
The sales miss vs our estimate was mainly a result of flat memory (SRAM) sales
vs our expectation for 8% q/q growth. In addition to $6.7m lower than expected
COGS, Cypress SG&A was below our estimate by $4.2m, which supported the
bulk of Cypress’s EPS beat. Neutral rating, $9.25 price target.
Cypress fundamentals improved, and it expects above seasonal 3Q growth
Cypress’s Consumer and Computation Division (CCD) sales grew 20% q/q to
$62.3m, above our $59.6m estimate on strength of PSoC microcontrollers and USB
products. Cypress’s multitouch PSoC, which sells into the Palm Pre, saw sales
double q/q. Cypress’s Data Communications Division (DCD) grew 25%q/q to
$25.5m. Inventory days declined 3 to 83 days, cash grew $22m and FCF was at
breakeven. With a 2Q 1.28 book-to-bill, Cypress expects a better than seasonal 3Q.
Macro bottoming but limited visibility; more details on the earnings call
Cypress sees stabilization in the macro and orders with 2Q backlog growing 51%
q/q to $184m, but with still limited visibility, it continues to manage to maximize
cash flow. Earnings call: 11:30 am ET, (517) 623-4671, Passcode: Cypress.
Valuation: $9.25 12-month Price Target, Neutral rating
Our DCF-based 12-month price target is $9.25 (21.5x our 43c 2011 EPS estimate).
Net Income (UBS)
EPS (UBS, US$)
Net DPS (UBS, US$)
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