NEW YORK – With almost 60 percent of its business is coming from a single customer – in this case Apple, Inc., it’s not quite kosher to call Cirrus Logic an independent fabless chip company any more. For many in the electronics industry, Cirrus Logic today walks like a captive and talks like a captive company of Apple.
It’s clear that Cirrus Logic has little choice at this point but to do everything it can – from supply-chain management to specific investment choices – to satisfy its biggest customer’s wishes.
Cirrus is predicting its September quarter revenue to shoot up more than 70 percent sequentially – thanks to Apple. At a time when the rest of the industry will be grateful for single-digit growth in the third quarter, Cirrus’ projections are a gift horse that no company would look in the mouth.
Wall Street expects Cirrus Logic, come September, to get design wins in what could be Apple’s biggest product release in years – iPhone 5 or iPad Mini.
The Austin, Texas-based chip company has been gradually adding new technologies to advance its audio codec and secure its Apple design wins. This includes adding in its DSP package features like audio amplifiers and noise suppression and echo cancellation technology for the iPhone.
Cirrus’s chips are also believed to be a shoo-in for Apple’s highly anticipated mini iPad, a smaller-screen media tablet. Apple is reportedly looking to add a 7-inch screen tablet to complement its existing 9.7-inch iPads.
Getting ready with a steep product ramp -- without a hitch -- for the single biggest customer is no easy task. Jason Rhode (left), Cirrus Logic's CEO, talked about the importance of getting the device ready far in advance, securing capacity with fab partners, working with a number of back-end assembly partners and readying a broad array of advance packaging. However, Cirrus is no stranger to such meticulous preparations, noted Rhode. “Cirrus has been a fabless company since 1984 before fabless was cool,” he added.
Why such an intrigue?
Curiously enough, Cirrus Logic’s CEO and a cluster of financial analysts participating in a Cirrus Logic conference call Monday (July 30th) managed not to utter the word “Apple” even once during the Q&A session that lasted almost an hour. They danced around the topic by vaguely referring to “the biggest customer.”
I have another separate question for everyone.
i wrote in this story: 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 fact, in the 10-Q, Cirrus Logic 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.”
So, I am still scratching my head why NOBODY in the conference call would NOT mention the name Apple at all.
I agree with your assessment -- especially on Cirrus front. But then, here's the thing. That means, while Apple has everything to win, Cirrus will everything to lose, once it gets designed out. Shouldn't Cirrus get compensated for this very lopsided position they are now in?
Apple would want to acquire chip/other companies for several reasons.
1) it has 100B cash in Bank and investors are pestering them to use it somehow :D
2) Block access to key & uncommon tech to competition (Anolbit,Authentec)
3) Bring inhouse the key and high value components (CPU, maps) so that there dependency on others are reduced. (PAsemi, integrity, C3 ,Placebase)
Actually Cirrus logic doesnt fall into key tech/uncommon/high value components. Hence Apple will have less motivation to acquire them.
OK. I got the logistics of how Apple can buy Cirrus at a reasonable price.
What I don't understand is the reasons why Apple would every want to buy any perifpheral chip companies (including Authentic acquisition announced yesterday: http://www.eetimes.com/electronics-news/4391386/Apple-to-acquire-fingerprint-chip-firm-Authentec)
Would anyone care to walk me through its pros and cons?
Cirrus Logic would have been a good acquisition target for Apple if not for its current market valuation of 2.4B which is 10 times its 2009 valuation. The current valuation is basically because of its Apple business and the day Apple finds another vendor, Cirrus logic stock will nose dive, which will again make it a good acquisition target for Apple. Convoluted hah?
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