When Rhode was asked by a financial analyst whether September’s
anticipated quarterly growth is due to unit-base growth or an average
selling price increase, Cirrus Logic’s CEO responded that the question
is a sensitive one to answer -- because it relates to its “customers.”
Rhode said, “It’s a little bit of all.”
Further, when asked about
the overall tablet market trend in Q3, Rhode declined to comment,
leaving the impression that he’d been warned not to tip off Apple’s
upcoming product (iPhone 5 or iPad mini) in Q3.
The Cirrus Logic
CEO was also quizzed about the state of the company’s overall audio chip
business “except for the biggest customer.” Rhode said the audio
business for the broad consumer market had “a decent Q1” and expects
reasonable demand in the second half of this year. Pressed further if
the consumer market in general for the third quarter is dire, Rhode
pointed out that Cirrus Logic’s chip business except for the biggest
company is rather small, implying that it’s not big enough to deduct the
overall industry trend. “But it doesn’t look bad either,” he added.
Cirrus Logic’s behavior -- jealously guarding the name of its biggest
customer -- and the financial community compliance strikes an odd note,
especially since Cirrus Logic on Monday filed Form 10-Q with the SEC. In
the form, it reported: “We had one end customer, Apple Inc. that
purchased through multiple contract manufacturers and represented
approximately 59 percent and 53 percent of the Company's total sales for
the first quarter of fiscal years 2013 and 2012, respectively.”
an SEC filing make this hip-to-hip relationship pretty obvious?
of course, Apple is famous for its almost totalitarian approach to
non-disclosure agreements. One chip company on Apple’s 2011 Suppliers list released earlier this year
said, “At my company, practically one third of our entire employees were
asked to sign the NDA by Apple.”
It’s understandable that a
component supplier shouldn’t be out there pre-announcing its customer’s
product. But the gag order against uttering the magic word “Apple” all
during the conference call with financial analysts was awkward at best
and at worst, outright Orwellian. It undercuts the credibility of
detracted from the company’s otherwise forthright business discussions.
Rhode, meanwhile, tried to highlight the company’s efforts
to broaden its customer base and expand its business.
notable for Cirrus Logic’s recent quarter is the design win in Philips’
A19 LED light bulbs. (A19 is a type of light bulbs most commonly found
today in the United States. It has a standard medium base and can screw
into a variety of sockets.)
Philips A19 LED light offers a fully
dimmable LED alternative to a standard light bulb and provides a soft
white light by using Cirrus Logic’s LED controllers.
entered the LED market in March 2012 with the first product in its LED
controllers, focused on solving dimmer compatibility issues. Fundamental
to Cirrus Logic's LED product family is the company's digital
technology, called TruDim, consisting of interface algorithms, LED
driver topologies and system architectures. Cirrus Logic claims that
TruDim digital intelligence allows the controller to identify the type
of dimmer in use and adapt its dimmer compatibility algorithm to provide
smooth dimming in much the same way the consumer has come to expect
from decades of using incandescent light bulbs.
near 100 percent compatibility with the world's installed base of
dimmers, the company’s newest CS163X family provides “two-channel LED
color mixing capabilities,” according to Rhode. The company claims that
it allows LED bulb manufacturers to more efficiently create warm,
natural light quality while also lowering the cost barrier for
two-channel LED retrofit bulbs.
True...but I was thinking more in line with PortalPlayer. At one point, 90 percent of PortalPlayer's revenue came from Apple's iPod design win.
Imagine how devestated they were when they lost that socket. The company, however, was sold to Nvidia in 2007 at about $357 million -- so...may be it wasn't the end of the world...
Like Dylan, I was going to point to TI. I think they show that losing a large customer does not equate to bankruptcy/irrelevance/etc. I think as long as Cirrus plans appropriately and continues to invest in new arenas then if they lose Apple they'd be fine. Sure they'd lose that massive revenue, but I think Cirrus would still be Cirrus. In the end, it was Cirrus that attracted Apple anyway. I would think they could land another lucrative deal, even if much smaller.
Because it is an incredibly risky thing for stockholders. Regulations require them to report it in the 10-Q, but the execs are still hoping to downplay the risk. After all, their own stock and options have seen a 10x gain since 2009.
You asked previously what's in it for Cirrus. Well, the major shareholders and execs were handed what amounted to a 10x gain. No doubt exec bonuses have been nice since 2009. You're right. There doesn't seem to be much in it for Cirrus at this point, but that's because the major shareholders and execs have already been paid in advance. They just have to maintain for a while in order to slowly cash in. BTW, another method to get the price down for a takeover is for the major shareholders to dump their stock and cash out.
The LED lighting is a big market but it is also very crowded and the profit margin is quite thin now. Anyway, it is necessary for Cirrus to expand the market base. Having Apple helps to boost their revenue but sooner it can become a big risk and big hole in business is always waiting ahead.
I agree. Cirrus may be in a precarious situation having so much revenue come from one customer, but on the other hand, at least they are getting that revenue. Is it guaranteed to last? No. But what is? I am sure they are trying hard to get more customers, but in the meantime, might as well keep riding this cash cow all the way to the bank.
I think this is an interesting dynamic in the analyst calls, and it's not just with Cirrus. Executives at many companies bend over backwards not to mention specific companies, even when it's clear to everyone involved who they are talking about. Texas Instruments has at least a few times blamed declining wireless chip sales on "lower demand from a major customer." That customer is Nokia, and everyone knows it. But TI most of the time avoids mentioning this major customer by name. And most analysts, for whatever reason, seem to play along with it. It's all wink, wink, nudge, nudge.