MOUNTAIN VIEW, Calif.--Austin, Texas-based Silicon Laboratories Inc. announced it had finished Q3 at the top of its revenue guidance at $119.1 million, despite weaker profits, macro-economic uncertainty and slower market demand.
Chief Financial Officer Paul Walsh said that while third quarter revenue was down 5.6 percent sequentially, the firm was able to hold firm to its previous predictions thanks to “strong operational performance.”
The company’s GAAP gross margin was slightly up last quarter at 61.2 percent, while R&D investment declined to $31.7 million.
Non-GAAP results showed a revenue mix that Walsh said “differed somewhat” from the firm’s initial expectations going in to the quarter, with Silicon Labs’ broadcast business coming in relatively flat, while the company’s Broad-based and Access products saw “larger macro-related declines.”
“Given the mix shift, gross margins was down 60 basis points to 61.5%. We expect that margins remain in this range in Q4,” he said. Company profits were down nearly 38 percent while revenue declined almost 1 percent from the same quarter last year.
The firm said it had managed to reduce spending by around 5 percent, however, with R&D decreasing to 28.1 million, resulting in a net income of $19.1 million and earnings per share of $0.44, above earlier guidance. The company ended Q3 with $301 million in cash and short-term securities.
Walsh attributed some of what he called “the impressive earnings result” to Silicon Labs’ aggressive buyback activity whereby the firm spent $86 million in Q3 to buy-back 2.5 million shares.
The company’s president and CEO Necip Sayiner said it was clear that the early indications the firm had seen in July of weakening end markets “were not unique to Silicon Labs,” and while the firm had recognized the slowdown early, its visibility had still been limited and resulted in a “revenue composition change” over the course of the quarter.
Sayiner said broadcast had actually performed better than expected, “led by solid Audio demand and a less steep decline in Video.”
Silicon Labs’ FM tuner business saw a seasonal lift, with Sayiner adding that all audio products in general continued “to generate strong design win activity.”
TV tuners and demodulator shipments declined, said Sayiner, due to TV makers locking out inventory, but the CEO said he believed the inventory correction had now largely been addressed, and that Silicon Labs’ Video segment would be up by the end of Q4.
“From a competitive standpoint, I feel very good about our position going into 2012. The degree of penetration we are seeing at tier 1 TV makers is meaningful and could represent significant upside when TV sell-through improves,” he said.
Silicon Labs is expanding its portfolio in the TV market and Sayiner said he believed his firm had “the broader set of offerings for iDTVs globally.”
The firm recently announced its silicon tuner family targeted at tier 2 TV makers selling to the emerging markets, which Sayiner said represented “an untapped segment where silicon tuner penetration is virtually 0.” The firm also recently released its latest generation hybrid silicon tuner.
“We now provide TV makers with a full range of options from analog or digital-only tuners, to full-featured and fully integrated receivers, a portfolio unmatched by competitors,” he said, noting that this enabled a single PCB design, as well as time and cost savings by using a single software API and predictable RF performance regardless of the SKU.
Sayiner said Silicon Labs’ Timing product line had “surprised” the firm by delivering another record quarter. “We also secured a record number of design wins and identified new opportunities in applications including wireless video and data streaming, docking stations, IP phones and solid-state storage,” he said.
In terms of the telecom market, however, Sayiner was less optimistic, saying he did not expect much of a recovery in Q4. “We're positioned well with tier 1 telecom OEMs, and have new business ready to wrap with our mid-range products. So if any sustained improvement in this space does materialize, it would represent upside,” he said.
Sayiner went on to express optimism about his firm’s touch controller which recently got a big design win from Samsung Electronics, to be included in the Korean firm’s Galaxy Y family.
Looking towards the fourth quarter, Sayiner said the firm was expecting revenue to be in the range of up 3 percent to down 3 percent sequentially, with gross margins expected to stay within their current range. He also said Silicon Labs expects operating expenses to increase by between 2 and 3 percent, to reflect more tape-out activity in Q4.
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