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July 24, 2009
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Lattice Semiconductor Corporation (LSCC) reported second quarter results that beat the consensus revenue and earnings estimates by 9.6% and 3 cents, respectively. The peer group consists of Xilinx (XLNX), which missed by 5 cents, and Altera Corporation (ALTR), which reported in-line. Another logic player, Actel Corporation (ACTL) is expected to disappoint, as the company is seeing weakness in a particular product line.
Revenue of $46.9 million was up 8.2% sequentially and down 19.2% year over year. The sequential increase was driven by the Chinese communications business and success of new products. Similar to many other semiconductor companies, such as Linear Technologies (LLTC) and Intersil Corporation (ISIL), Lattice also benefited from strength in the computing and consumer markets. These two end markets generated 12% and 14% of revenue, and grew 62.3% and 37.7%, respectively. The communications market (57% of total revenue) declined 2.1% sequentially, while industrial and other (17%) increased 2.2%.
The newer FPGA products were up 11.6% sequentially and 29.9% year over year. PLD revenue increased 6.3% sequentially and declined 33.9% year over year. Total new products increased 25.8% sequentially and 73.0% from the year-ago quarter. Mainstream and mature products witnessed single-digit sequential and double-digits year over year declines. The new 90nm SERDES enabled products did not contribute to sequential growth, however they were up strongly from the year-ago quarter.
Around 64% of revenue was generated in Asia, 20% in North America and 16% in Europe.
Gross margin was 52.4%, down 14 basis points (bps) from 52.6% posted in the previous quarter. This was largely mix-related, as lower-margin new products grew, while mainstream and mature products declined. Also, lower-margin computing and consumer revenue increased more significantly than higher-margin industrial and communications. This was partially offset by higher volumes, cost controls and improved yields.
Operating expenses of $26.3 million were lower than the previous quarter’s $26.7 million. The operating margin was -3.6%, up 535 bps sequentially from -9.0% posted in the previous quarter. The operating margin increase was attributable to lower R&D expenses, coupled with flattish COGS and SG&A (as a percentage of sales).
The pro forma net loss was $1.3 million, or -2.9% of sales. This compares to loss of $3.6 million, or -8.3% in the previous quarter and income of $1.2 million, or 2.2% in the year-ago quarter. Including restructuring charges, stock compensation expenses and adjustments related to auction rated securities, the GAAP loss was $2.7 million (-$0.02 per share) compared to losses of $5.8 million (-$0.05) in the previous quarter and $13.6 (-$0.12) in the year-ago quarter. Special items reduced the GAAP EPS by $0.01.
The balance sheet is debt free. Inventories decreased -7.2%, while inventory turns increased from 2.7x to 3.2x. DSOs went down from 53 to 52 days. The company ended with cash and marketable securities of $104.3 million, or $0.90 per share.
Management guided to a third quarter revenue decline of 2-3%, gross margin in the 52%-54% range, and operating expenses of $29.2 million including $1.2 million for restructuring. The tax provision is expected to be negligible for another few quarters, as the company has significant NOLs carried forward.
Read the full analyst report on "LSCC"
Read the full analyst report on "XLNX"
Read the full analyst report on "ALTR"
Read the full analyst report on "ACTL"
Read the full analyst report on "LLTC"
Read the full analyst report on "ISIL"
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