TSM Stumbles: Fool by Numbers

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On Jan. 25, chip foundry Taiwan Semiconductor Manufacturing (NYSE: TSM) released fourth-quarter earnings for the 2006 fiscal year ending Dec. 31, 2006.

• This was a tough quarter any way you slice it, and once again the finger is pointed at sluggish demand for high-end cell phones. Entry-level phones are based on low-end chipsets, and semiconductor foundries like TSM make their big money when Texas Instruments (NYSE: TXN), Analog Devices (NYSE: ADI), and their peers need a hand with top-of-the-line manufacturing.
• The good news is that earnings are still positive, and both kinds of cash flows actually increased. $630 million of depreciation and amortization helped with that.
• The stock price dropped 6% on this news, but the company still has a four-star CAPS rating. Find out why your fellow Fools like TSM, and weigh in with your own take on this company -- or any company at all.

(Figures in millions, except per-share data; dollar values as reported by the company)

Income Statement Highlights

	Q4 2006	Q4 2005	Change
Sales	$2,283	$2,412	(5.4%)
Net Profit	$853	$1,032	(17.4%)
EPS	$0.17	$0.21	(19.0%)
Diluted Shares	5163.0	4938.6	4.5%

Get back to basics with a look at the income statement.

Margin Checkup

	Q4 2006	Q4 2005	Change*
Gross Margin	46.0%	58.4%	(12.5)
Operating Margin	36.6%	43.4%	(6.9)
Net Margin	37.4%	42.8%	(5.4)

*Expressed in percentage points.

Margins are the earnings engine. See how they work.

Management Effectiveness

	Q4 2006	Q4 2005	Change*
Return On Assets	19.5%	26.8%	(7.4)
Return On Equity	22.6%	31.8%	(9.2)

*Expressed in percentage points.

See how management puts its financial tools to work.

Balance Sheet Highlights

Assets	Q4 2006	Q4 2005	Change
Cash + ST Invest.	$5,985	$4,470	33.9%
Accounts Rec.	$969	$1,169	(17.1%)
Inventory	$657	$540	21.7%

Liabilities	Q4 2006	Q4 2005	Change
Accounts Payable	$631	$563	12.1%
Long-Term Debt	$383	$614	(37.6%)

Learn the ways of the balance sheet.

Cash Flow Highlights

	Q4 2006	Q4 2005	Change
Cash From Ops.	$1,711	$1,525	12.2%
Capital Expenditures	$587	$415	41.6%
Free Cash Flow	$1,124	$1,110	1.2%
Owner Earnings	$900	$1,186	(24.1%)

Find out why Fools always follow the money.

Related Companies:

• Cypress Semiconductor (NYSE: CY)
• National Semiconductor (NYSE: NSM)
• ARM Holdings (Nsadaq: ARMHY)
• United Microelectronics (NYSE: UMC)

Related Foolishness:

• Looking for the World's Best Stocks
• Taiwan Semiconductor -- Making Profits Chip by Chip

ARM is a Motley Fool Stock Advisor recommendation. Find out more with a free 30-day trial subscription.

Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check Fool.com for more of our in-depth discussion of what the numbers mean.

At the time of publication, Anders Bylund was a Taiwan Semiconductor Manufacturing shareholder but had no position in any other company mentioned. Fool rules are here.