SAN FRANCISCO — Cypress Semiconductor Corp. this week issued another strong financial report, posting record sales for a second consecutive quarter on strength in automotive, IoT connectivity and USB-C chips, despite being sidetracked by a messy proxy fight with the company's founder, T.J. Rodgers.
But for Hassane El-Khoury, Cypress president and CEO, growing revenue is far less important than increasing the company's profitability. While sales improved nearly 12 percent compared to the first quarter to reach $593.8 million, the company's pro forma net income grew at more than five times that rate — 61 percent — to reach $74.7 million. (On a GAAP basis, Cypress halved its quarterly loss to $22.9 million from $45.7 million in the first quarter).
"It's what I call high-calorie growth. It's not the empty calorie growth where you grow only on the top line but not the bottom line," El-Khoury said in an interview with EE Times Friday (July 28).
He said Cypress will not chase revenue to increase sales at the expense of distracting the company from more profitable pursuits. For example, he said, Cypress was No. 1 in NOR flash chip sales at the time the company acquired Spansion Inc. in 2015. But Cypress walked away from the market for low-end, low-density, commodity NOR chips to focus on higher-end products in automotive and industrial end markets.
"We actually walked away from about $80 million in revenue in that business," El-Khoury said. "We are No. 2 today [in NOR flash], but we have 200 percent of the profit. I'm okay with that."
Since taking over as CEO of Cypress from Rodgers a year ago, El-Khoury has articulated a consistent strategy of selling embedded chips into markets that are growing faster than the overall semiconductor industry. That strategy, dubbed "Cypress 3.0," is paying off. In addition to beating analysts' expectations for sales and profit, Cypress also pleased Wall Street by issuing a better-than-expected third quarter sales forecast that calls for revenue to grow to between $585 million and $615 million.
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