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conference date: August 4, 2006
for quarter ending: June 24, 2006 (4th fiscal quarter 2006)
Overview: Good revenue growth fails to increase net income due to stock-based compensation. Increased cash dividend to $.156 per share.
Basic data:
Net revenues of $510.6 million up 6.8% sequentially from $478.1 million and up 27.5% from $400.4 million for June 2005. GAAP net income was $124.3 million or .37 per share, close to flat sequentially and compared to year-earlier on a per-share basis. This included $51.3 million in stock-based compensation, up over $10 million from the prior quarter.
Gross margin was 66.35%. 2.4 million shares of MXIM common stock were repurchased for $76.7 million. Dividends paid were $40.2 million. $121 million capital expenses. Accounts receivable increased $32.7 million in the fourth quarter to $292.6 million. Inventories for the fourth quarter increased $2.8 million to $207.4 million. But days-to-sell inventory decreased.
Cash and short term investments ended at $1.34 billion, flat from the prior quarter.
Guidance:
Q1 2007 (Sep. 2006) revenues up 1 to 3 %; .48 cents non-GAAP revenues, excluding possible revisions for option expenses. Expects fiscal 2007 growth at or above 4-year trend line.
Conference Highlights:
Backlogs and bookings strong.
Expects tax rate to increase slightly due to end of extra-territorial tax credits.
They can't discuss the stock option backdating litigation and investigation issues.
Gross margin drop was due to product mix change and .6% drop due to manufacturing difficulties equipment installation interfered with production.
New products introduced included full-bridge controllers for LCD displays; anti-aliasing filter for displays; power management chips for smart phones; camera power supply chips; base station amplifier; etc. AMD notebook computer reference designs use MXIM chips exclusively. MSFT Vista-compliant headphone and speaker drivers.
Q&A:
Why only 1 to 3% growth revenue guidance? June and July months were slow. Customers are shortening lead times. Ended June with more backlog than ever. Believes will be an August - October build, but that goes into December quarter.
High integration projects don't necessarily require a lot of engineering because they produce building blocks, which then are combined for a specific product. When they enter an entirely new market, then there is a heavy engineering expense.
Visibility on manufacturing? Ramping all fabs for 2007-2008. 6 inch conversion should be completed in 2 quarters. So expects disruption to abate.
One new product may require over 100 million pieces over the next two years; this requires equipment changes and a ramp-up process.
Some products that are killing gross-margins now are strategically important because they are cores that will become more profitable later on.
Price concessions are sometimes necessary to get into a new market segment or particular device maker.
Possible alliance with Marvell? No discussions yet, but possible.
Intends to build inventory this quarter, the problem is building the right mix of inventory. Last quarter shipped out box stock but increased die bank, with neutral result.
Intel Mobile reference platforms? Many design wins in Taiwan and US OEM's, but has not done as well with Intel designs as with AMD.
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Disclaimer: Our analyst summaries may include both our condensations of statements made by company representatives and our own analysis. They are not covered by any warranty. We cannot guarantee anything said by company representatives is true. Before making or terminating an investment you should always verify any factual basis of your decision.
Copyright 2006 William P. Meyers