The Apple plays: TriQuint and Cirrus Logic
The Apple component suppliers my portfolio owns are TriQuint
Looking at the earnings story, Cirrus Logic slightly beat on both earnings and sales. It produced sales of $110.6 million and adjusted earnings of $0.36 per share. That slightly beats expectations of sales at $110.1 million and earnings of $0.34 per share. Looking into the future, the company is actually expected to miss expectations next quarter, with a midpoint of $101 million projected next quarter versus expectations around $106 million. However, while Cirrus Logic projected a blip this quarter, it hinted at huge demand building in the latter half of the year.
Likewise, TriQuint had weak guidance. Like Cirrus Logic, this quarter went pretty much according to expectations, but the company issued guidance way below expectations. Sales will come in at a midpoint of $178 million versus the Street expectation of $224 million. That's the kind of miss you can drive an 18-wheeler truck through; it's ugly. The company blamed the shortfall on Foxconn, which is essentially a proxy for Apple, since Foxconn contract manufactures for the company.
Weakness ahead for Apple, then opportunity
Looking at the two key suppliers, we get a common theme that there's going to be temporary weakness next quarter. Beyond these two, Qualcomm
Apple blew out estimates last quarter, but it was also aided by a huge iPhone 4S launch in China and buying events like the Chinese New Year that led to an influx of sales. Apple's guidance usually isn't very meaningful, since it's the king of low-balling, but its worse-than-expected guidance yesterday could have some merit. With key buying catalysts passed and the iPhone 4S approaching the mid-life cycle between upgrades, next quarter could disappoint analysts. I know "disappointing analysts" is a four-letter word with Apple since it almost never happens, but the signs are certainly there.
However, before you rush off to sell Apple, here's the good news: All signs also point to another monster back half of the year. Cirrus Logic announced a credit facility to facilitate "various product introductions" later in the year and seemed generally bullish on the next fiscal year. TriQuint said the second quarter will be weak but expects demand to return by the third quarter. Likewise, while Qualcomm's next quarter is weak, it upped its full-year earnings projection. The general consensus seems to be: Yeah, next quarter might stink, but wait until you see what the iPhone 5 does after the current quarter. All signs appear to be pointing toward an iPhone launch this fall.
The bottom line
Moving beyond what to expect from Apple itself, I remain impressed with Cirrus Logic. Aside from its obvious overreliance on Apple, I'm expecting several of its other endeavors -- such as new energy markets -- to begin paying off this year. On the other hand, I'm less than impressed with TriQuint.
Management consistently overpromises and underdelivers, and I generally find them out of touch and underperforming their peers. My colleague Anders Bylund called TriQuint CEO Ralph Quinsey the worst CEO of 2011. At the time, I thought that was an overly harsh assessment. However, as I watch TriQuint continue to flounder (mind you, a day after rival RF Micro Devices
Ideas for a booming smartphone world
As Apple just proved again, the mobile revolution is the largest technology trend in decades. To help investors sort out other winners aside from Apple, The Motley Fool has a just released free report on mobile named "The Next Trillion-Dollar Revolution" that details a "hidden" component play inside mobile phones that also is a market leader in the exploding Chinese market that propelled Apple this quarter. Inside the report. we not only describe why the mobile revolution will dwarf any other technology revolution seen before it, but we also name the company at the forefront of the trend. Hundreds of thousands have requested access to previous reports, but you can be among the first to access this just-released report by clicking here -- it's free.