Cypress Reports First Quarter 2002 Results | Cypress Semiconductor
Cypress Reports First Quarter 2002 Results
Cypress Reports First Quarter 2002 Results
SAN JOSE, California, April 18, 2002 - Cypress Semiconductor Corporation (NYSE: CY) today announced that revenue for the 2002 first quarter, ended March 31, 2002, was $193.2 million, up 1% from 2001 fourth quarter revenue of $191.1 million but down 26% from year-ago quarter revenue of $262.3 million. Pro forma net loss for 2002 first quarter was $12.6 million resulting in a pro forma diluted loss per share of $0.10, compared with a fourth quarter 2001 pro forma diluted loss per share of $0.11 and year-ago first quarter pro forma earnings of $0.25 per diluted share. Including acquisition-related costs, restructuring or non-recurring charges and credits, Cypress posted a net loss of $39.8 million for the first quarter, resulting in a diluted loss per share of $0.33, compared with a fourth quarter 2001 diluted loss per share of $0.31.
Cypress CEO T.J. Rodgers said, "Both our revenue and pro forma loss of $0.10 per share met or exceeded analysts' expectations. This is our second sequential quarter of revenue and earnings improvement, further strengthening our belief that the third quarter last year was the bottom of the recent downturn for Cypress. Our bookings of $201.5 million resulted in a book-to-bill of 1.04, providing us with a modest backlog that has been absent in recent quarters. Although we still need bookings in order to meet expectations for the June quarter, we expect to grow and to improve earnings sequentially."
Rodgers continued, "The data communications market is beginning to improve after one year of dormancy, the wireless market remains active at a reasonably high level and the consumer market continues to be strong. We are therefore growing mildly even though our largest market segment, data communications, is just starting to recover. We expect continued recovery through the end of the year on into 2003."
Wide Area Network and Storage Area Network (WAN/SAN)
Revenue from the WAN/SAN segments, which accounted for 34% of first quarter revenue, increased 4.2% quarter-to-quarter, showing continued modest recovery in this market segment, which still suffers from end-demand issues. The WAN/SAN segment posted a gross margin of 48% in the first quarter. We expect WAN/SAN revenue to grow modestly in the second quarter. Segment highlights for the quarter include:
-Cypress subsidiary Silicon Light Machines delivered samples of its SLM 2200 dynamic gain equalizer (DGE), an electronics subsystem that automatically and continuously adjusts the intensity of the light streams in dense wave division multiplexing (DWDM) optical fiber transport systems. SLM 2200 samples are currently being evaluated by several major optical-systems suppliers. The SLM 2200 is a complex electronics subsystem; its core component is a Grating Light Valve™ manufactured at Cypress's Round Rock, Texas plant.
- Cypress sampled its Packet Over SONET Integrated Circuit (POSIC(TM)) framer, the industry's most advanced SONET/SDH framer for OC-48 (2.5-Gbps) transmission speeds. First samples have been shipped to Lucent Technologies and Groupe Sagem, France's largest telecommunications company. The framer is the only one in the industry to provide virtual concatenation, the capability to dynamically allocate up to 16 channels of voice and data, providing right-sized, secure, dedicated bandwidth for high-speed data networks. It transports any protocol over SONET/SDH, including Gigabit Ethernet, Fibre Channel, Enterprise System Connection (ESCON) and Digital Video Broadcast (DVB).
- Cypress is awaiting first silicon on a 10-Gbps framer device for OC-192/STM-64 SONET/SDH and 10G Ethernet. Cypress expects to sample this device in the second quarter. The new framer is a product of Cypress's January 2002 acquisition of Silicon Packets Inc. It targets networking infrastructure equipment such as switches and routers in metropolitan area networks (MAN) and wide area networks (WAN).
- Cypress sampled its 256K Network Search Engine (NSE), a device which performs hardware lookup of the packet forwarding address for fast routing. The 256K-entry device (each entry has 32 bits) is the largest device of its type. It also has the lowest power in its class.
- Cypress acquired Sahasra, a five-man braintrust out of Stanford University with a breakthrough method of making large-entry, next-generation NSEs. Cypress plans to spend 2002 capturing Sahasra's architecture in silicon and to announce a product in 2003.
- Cypress introduced four clock distribution devices for the communications market, including zero- and nonzero delay buffers that replicate a system clock to multiple devices in the same time domain with very-low delay.
- Cypress introduced four new products in its Com-Link(TM) line of bus interface and clock management products. Com-Link is the industry's fastest family of bus interface and backplane chips, increasing by up to 20% the speed at which data moves between linecards and between motherboards and add-in cards.
Wireless Terminals and Wireless Infrastructure (WIT/WIN)
Revenue from the WIT/WIN segments, which accounted for 32% of first quarter revenue, increased by 1.1% from the prior quarter due to an increase in cellular handset business and the continued shift toward higher-density memories in cell phones. Despite robust unit sales, these segments experienced a significant average selling price decline and posted a gross margin of 28% in the first quarter. We expect WIT/WIN sales to be slightly up in the second quarter of 2002. Segment highlights for the quarter include:
- Cypress announced that it is sampling its 8-Mbit, 1.8 V, second-generation (More Battery Life(TM)) MoBL(TM) SRAMs, known as MoBL2(TM) devices. The CY62157CV18LL micropower family, which is manufactured using Cypress's proprietary, RAM8(TM), 0.13-micron process, is specifically designed for 2.5G cell phones. The RAM8 process produces 50% more chips per wafer than the RAM7 process, which is currently in full production. Full production of the RAM8 SRAM family is scheduled for the second half of 2002.
- Cypress shipped first revenue on its 9-Mbit Dual-Port RAM, the world's highest-density true dual-port memory, and announced that the new dual-port achieved a design win in NEC Corp. 3G wireless basestations. Cypress dual-ports are specifically designed to address the demanding memory buffering requirements of high-performance basestations, storage networks and wide-area networks.
- Cypress and ProMOS Technology Inc. of Taiwan announced a key strategic alliance to collaborate on the development of one-transistor (1T) cell pseudo-SRAM products for cellular phones and other mobile applications. The devices will offer performance close to that of an SRAM, but at DRAM densities. Under the agreement, ProMOS will supply the process technology and Cypress the product technology, enhancing Cypress's leadership position in the micropower SRAM market.
- Cypress and NanoAmp Solutions Inc. announced a joint technology venture to develop 1T asynchronous SRAMs for the low-power wireless communications market. This 1T technology offers a lower-cost solution for devices targeting applications such as 3G mobile phones. The agreement ensures that both companies will develop a common product specification to provide their customers with compatible, multisourced products.
Computation and Other
Revenue from the computation and other segment, which accounted for 34% of first quarter revenue, decreased 1.9% from the prior quarter, driven by a continued increase in USB sales, offset by cyclically down PC-related clock sales. Gross margins were 41% in the first quarter. We expect this market segment to have flat revenue in the second quarter of 2002. Segment highlights for the quarter include:
- Cypress subsidiary Cypress Microsystems' (CMS) first product, the Programmable System on a Chip(TM) (PSoC(TM)) microcontroller, was selected from among hundreds of candidates as a winner in the 8- to 16-bit microcontroller category of the "2001 Innovation of the Year" competition sponsored by EDN, the most widely read design publication in the electronics industry.
- CMS brought dynamic reconfigurability to its family of PSoC microcontrollers. CMS's new PSoC Designer(TM) software tool set enables design engineers to program and reprogram a single PSoC chip multiple times, changing functionality on the fly in an application.
- Cypress was first in the industry to ship over two million high-speed Universal Serial Bus (USB) 2.0 peripheral controllers. The success of its high-speed ISD-300A1 (mass storage) and EZ-USB FX2(TM) products extends Cypress's No. 1 position overall in the USB business to the fast-growing market for 480 megabit-per-second USB 2.0 devices. Cypress topped the 100-million-unit mark for total USB shipments last year.
- Cypress and Realtek Semiconductor Corporation jointly developed a reference design for high-speed USB 2.0 scanners. This reference design incorporates Cypress's CS5979AM USB 2.0 peripheral controller and Realtek's RTS8821 scanner controller in a cost-effective solution that enables breakthrough data transfer rates.
- Cypress introduced a 533-MHz dual memory clock generator (DMCG), a clock generator for RAMBUS interfaces, and announced that the device has been designed in by Intel Corp. Cypress is the sole qualified source of this DMCG and is currently ramping into mass production. The company initially expects to ship 1.5 million units per quarter.
- Cypress announced a combination USB-PS/2 optical mouse reference design for PC pointing devices. Cypress collaborated with Agilent Technologies to offer a design for a low-cost, full-featured PS/2 optical mouse solution based on Cypress's CY7C63723 enCoRe™ (enhanced Component Reduction(TM)) USB microcontroller and Agilent's ADNS-2051 optical mouse sensor. The Cypress device features the company's proprietary, eight-bit microcontroller core, the industry's smallest.
- Cypress and WIDCOMM Inc. announced an agreement to jointly develop next-generation Bluetooth™ solutions. Cypress will license from WIDCOMM a range of Bluetooth software products, including BTE (Bluetooth Embedded Software) and BTE development tools. WIDCOMM engineers will work with Cypress to develop customized Bluetooth solutions for Cypress customers. This cooperative effort will combine Cypress's personal communications and manufacturing expertise with WIDCOMM's proficiency in short-range wireless connectivity.
The company repurchased $36.0 million of its 3.75% convertible debentures due July 2005 through open market purchases. The debentures were purchased at a discount of approximately 15%, netting a pre-tax gain of $4.7 million, which was reported as a one-time event, not as pro forma earnings.
Rodgers concluded, "We are pleased to continue on an upward trend in revenue and profit. We have grown revenue 7% in the two quarters since Q301, which appears to have been the bottom of the 2001 recession. Our bookings have grown over the last four quarters, and we finally added some backlog after five* quarters of sequential decline. Visibility continues to be limited, but we are seeing positive signs of business improvement. We will continue to control our costs, to focus on new products and to drive toward profitability this year."
Cypress Semiconductor Corporation is "Driving the Communications Revolution"(TM) with high-performance integrated circuits for network infrastructure and access equipment. Leveraging its process and system-level expertise, the company designs and manufactures solutions targeted across wireless and wireline communications. Cypress supports a wide range of industry standards, such as SONET/SDH (OC-192/STM-64 and above), 10G Ethernet, Voice over Internet Protocol (VoIP) and InfiniBand. The company's communications product lines include programmable high-speed physical layer devices (PHYs), wirespeed network search engines (NSEs) and network coprocessors (NCPs), and datapath switching elements (DSEs). Cypress is also the industry's foremost provider of communications timing solutions, networking-optimized communications memories and personal connectivity solutions, such as USB and Bluetooth.
Cypress is a leader in pure optical and optoelectronic technologies designed to push network transmissions to higher performance levels and to satisfy the increasing demand for network bandwidth. With a focus on emerging communications applications, Cypress aims to become the preferred silicon supplier for network infrastructure solutions and for every network data stream to pass through at least one Cypress IC.
Cypress employs approximately 4,000 people worldwide. Its shares are listed on the New York Stock Exchange under the symbol CY. More information about Cypress is accessible on the Web at https://www.cypress.com.
Safe Harbor - Forward Looking Statements
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements herein that are not historical facts are "forward-looking statements" involving risks and uncertainties, including but not limited to: the effect of global economic conditions, shifts in supply and demand, market acceptance, the impact of competitive products and pricing, product development, commercialization and technological difficulties, and capacity and supply constraints." Please refer to Cypress's Securities and Exchange Commission filings for a discussion of such risks.
Cypress, the Cypress logo, and MoBL are registered trademarks of Cypress Semiconductor Corporation. Grating Light Valve, POSIC, Com-Link, RAM7, RAM5, More Battery Life, MoBL2, RAM8, Programmable System-on-Chip, PSoC, PSoC Designer, EZ-USB FX2, enCoRe, Enhanced Component Reduction, and Driving the Communications Revolution are trademarks of Cypress Semiconductor Corporation.
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