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SAN JOSE, Calif., July 21, 2011 —Cypress Semiconductor Corp. (NASDAQ: CY) today announced second-quarter 2011 results, which included the following highlights and remarks from its president and CEO, T.J. Rodgers.
- Q2 results at high end of guidance
- TrueTouch® exceeded expectations on strong mobile phone and tablet ramps
- Emerging Technologies Division achieved its first $10 million revenue quarter
- Cash flow from operations increased 33% year-on-year
- Produced the highest non-GAAP1 net income since 2000
Our revenue and earnings for the quarter are given below, compared with the prior-quarter and prior-year results:
Our second-quarter revenue grew 9% sequentially, at the high end of our guidance, and grew 13% sequentially for ongoing operations (net of our Q1 Image Sensor divestiture). Our TrueTouch touchscreen business exceeded our expectations due to strong ramps at leading mobile phone customers and initial production ramps of new tablet products.
CCD, our “PSoC® division,” contributed a record 51% of revenue and grew 21% sequentially. Our overall mobile handset revenues—which are predominantly driven by smartphones—increased 32% sequentially and 197% year-on-year, due not only to revenue from our PSoC-powered TrueTouch touchscreen controllers, but also from our West Bridge® controllers, and our ONS laser navigation solutions. In addition, Cypress’s Emerging Technology Division achieved its first $10 million revenue quarter, led by our Optical Navigation Sensors (ONS) business unit.
Cypress’s non-GAAP1 net income grew 29.9% sequentially, 3.2 times faster than our revenue growth. We remain very focused on driving operating leverage and cash flow.
We have good visibility into Q3 and Q4, especially for our rapidly growing touchscreen controllers and SRAM products. Our book-to-bill for Q2 was 1.09, above our seasonal average, and we ended the first week of the third quarter almost fully booked and with over 50% of the fourth quarter already booked, both well above historical levels. We expect continued revenue and earnings growth in Q3 driven by record touchscreen sales and SRAM growth.
Our non-GAAP1 consolidated gross margin for the second quarter was 57.2%, down 0.9 percentage points from the previous quarter due mainly to product and customer mix and higher depreciation due to our S8 capacity expansion. Our GAAP second-quarter consolidated gross margin was 54.5%.
Our net inventory dollars at the end of the second quarter were flat relative to Q1, and our days of inventory decreased by 10 days to 87 days, the lowest level in three quarters. Distributor weeks of inventory on hand (which includes in-transit inventory) decreased from 6.5 weeks to 5.7 weeks, the lowest level since 2008.
Cash and investments for the second quarter totaled $378 million, an increase of $98 million from the prior quarter, and equivalent to approximately $2.21 per outstanding share. During the quarter, a temporary dip in share price allowed for us to buy back 5.3 million shares of common stock (3.1% of total outstanding shares) for $101.1 million—a price of only $19.02 per share. Since we announced our $600-million stock repurchase program in October 2010, we have repurchased 15.4 million shares through July 3, 2011 and have approximately $300 million left for repurchases.
Our divisional revenue and gross margins are detailed below:
SECOND-QUARTER 2011 HIGHLIGHTS
Cypress shipped its one-billionth PSoC programmable-system-on-chip device on July 19. The device was shipped to General Electric and will be used for a medical application. Cypress began commercial shipments of its PSoC programmable system-on-chip devices in 2002, achieving one of the fastest product ramps in microcontroller history.
Cypress announced that Samsung Electronics Company Ltd. has selected the OvationONS™ II optical navigation system for its Android-based Intercept phones.
Cypress announced that it is working with NVIDIA, a leader in computation technology, to develop touchscreen implementations for next-generation Android 3.0-based tablets. The designs are based on Cypress’s single-chip TrueTouch solution for large touchscreens and NVIDIA’s high-performance multicore processors.
Cypress announced that Fujitsu Limited has selected the TrueTouch touchscreen solution from Cypress to implement the touchscreens in its new F07C, F09C, and F12C mobile phones, to be marketed by NTT Docomo.
Cypress unveiled a breakthrough TrueTouch family solution that enables the use of single-layer touchscreens, providing the benefits of capacitive touchscreens at resistive touchscreen prices. Compared to resistive touchscreens, capacitive touchscreens enable a more feature-rich user experience, lower power, and increased reliability and durability. Using a touchscreen with one, rather than two or three conductor layers, greatly reduces cost, making the overall solution ideal for low-end smartphones and feature phones, as well as cameras and GPS systems.
Cypress added industry-best waterproofing capabilities to its TrueTouch family of touchscreen products. TrueTouch devices now perform flawlessly in the presence of rain, mist, saltwater, humidity and sweat—conditions under which competing solutions can lock up or register false touches.
Clarion Co., Ltd. selected Cypress’s CapSense® touch-sensing solution to drive the dashboard touch panel of the Suzuki MR Wagon. The touch panel houses the main audio controls.
Cypress and Redpine Signals, Inc. have jointly developed 802.11 a/b/g/n wireless solutions enabling system engineers to add low-power, single-stream, 802.11n Wi-Fi capability to their PSoC 3- and PSoC 5-based embedded designs with reduced power and a smaller footprint. PSoC 3- and PSoC 5-compatible Wi-Fi expansion board kits (RS-CY8C001-220X) are available on the Redpine website (www.redpinesignals.com).
Cypress introduced the industry’s first USB 3.0 (SuperSpeed USB, 5 Gbps) solution for mobile handheld devices. The new West Bridge Benicia™ (CYWB0263) peripheral controller enables “sideloading” onto cell phones at up to 200 MB per second.
AgigA Tech Inc.—a subsidiary of Cypress and the leading developer of high-density, battery-free nonvolatile memory solutions—was selected as a Top 100 North America Tech Startup by Red Herring magazine. The Red Herring Top 100 has become a mark of distinction for promising new companies and entrepreneurs. Previous winners include Facebook, Twitter, Google, Yahoo, Skype, Salesforce.com, YouTube, and eBay.
Cypress introduced a new family of high-density First-In, First-Out (FIFO) memories. With densities up to 72 Mbits, these HD FIFO devices are the densest available from any source and particularly well-suited for streaming and buffering in HD video and imaging applications.
Cypress’s Board of Directors announced a cash dividend. The first quarterly cash dividend of $0.09 per share is payable to common stock shareholders of record at the close of business on June 24, 2011. The dividend will be paid on July 21, 2011.
Cypress named Dr. Wilbert van den Hoek to its board of directors. Van den Hoek replaces retiring board member Dr. Evert van de Ven. Van den Hoek is a former chief technical officer at Novellus Systems. He is also a technical advisor to seven high-tech companies, including Cypress.
Cypress donated a 75,000-square-foot building on five acres of land to the Second Harvest Food Bank of Santa Clara and San MateoCounties. Valued at approximately $9 million, the building and land, located in San Jose, Calif., is the largest corporate gift ever made to the Food Bank, enabling it to serve 18 million additional meals per year to the local community. In the dedication address, T.J. Rodgers lamented, “California’s economy has been so mismanaged that a building once holding 400 engineers has now been repurposed as a warehouse storing food for the hungry.”
Cypress recently named Weiking and Avnet as its distribution partners of the year. Weikeng, based in China and Taiwan, has helped to build record demand for Cypress’s PSoC solutions. Avnet Electronics Marketing has helped to drive record memory product sales and growth.
Cypress delivers high-performance, mixed-signal, programmable solutions that provide customers with rapid time-to-market and exceptional system value. Cypress offerings include the flagship PSoC programmable system-on-chip families and derivatives such as PowerPSoC® solutions for high-voltage and LED lighting applications, CapSense® touch sensing and TrueTouch solutions for touchscreens. Cypress is the world leader in USB controllers, including the high-performance West Bridge® solution that enhances connectivity and performance in multimedia handsets. Cypress is also a leader in high-performance memories and programmable timing devices. Cypress serves numerous markets including consumer, mobile handsets, computation, data communications, automotive, industrial and military. Cypress trades on the Nasdaq Global Select Market under the ticker symbol CY. Visit Cypress online at https://www.cypress.com.
Statements herein that are not historical facts and that refer to Cypress or its subsidiaries’ plans and expectations for the remainder of fiscal year 2011 and the future are forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. We may use words such as “believe,” “expect,” “future,” “plan,” “intend” and similar expressions to identify such forward-looking statements that include, but are not limited to, statements related to the semiconductor market, the strength and growth of our proprietary and programmable products, including our TrueTouch and PSoC product families, our expectations regarding our Q311 revenue and earnings, and the demand and growth in the markets we serve, including touchscreens and SRAM.. Such statements reflect our current expectations, which are based on information and data available to our management as of the date of this release. Our actual results may differ materially due a variety of uncertainties and risk factors, including but not limited to the state of and future of the global economy, business conditions and growth trends in the semiconductor market, our ability to enter into new markets with our portfolio of products, whether our products perform as expected, whether the demand for our proprietary and programmable products, including our TrueTouch and PSoC products, is fully realized, whether our product and design wins result in increased sales, customer acceptance of Cypress and its subsidiaries’ products, seasonality in the markets we serve, our ability to achieve lower operating expenses and maintain a solid balance sheet, any impact to sales due to the recent U.S. International Trade Commission ruling in Apple Inc. v. HTC Corp. et al, the actions of our competitors, the behavior of our supply chain, our ability to manage our business to have strong earnings and cash flow leverage, factory utilization, the strength or softness of the markets we serve and whether those markets achieve expected growth, our ability to maintain and improve our gross margins and realize our bookings, our ability to continue to focus on fixed costs, the financial performance of our subsidiaries and Emerging Technology Division, our ability to outgrow the market in revenue once the economy recovers and other risks described in our filings with the Securities and Exchange Commission. We assume no responsibility to update any such forward-looking statements.
Cypress, the Cypress logo, PSoC, CapSense, PowerPSoC, West Bridge, EZ-USB and QDR are registered trademarks of Cypress Semiconductor Corp. Programmable System-on-Chip, TrueTouch, SmartSense, Charger Armor, and PSoC Creator are trademarks of Cypress Semiconductor Corp. All other trademarks or registered trademarks are the property of their respective owners.