Why Cypress Semiconductor Shares Dropped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Cypress Semiconductor (NASDAQ: CY  ) plunged by nearly 16% during Tuesday's intraday trading after the company lowered its third-quarter 2013 guidance.

So what: For the quarter, Cypress now expects revenue of $184 million to $187 million, which should translate to adjusted earnings per diluted share of $0.10 to $0.12. Previously, the company had told investors to expect revenue in the range of $201 million to $207 million and non-GAAP earnings per share of $0.17 to $0.18. For reference, analysts on average were expecting adjusted earnings of $0.17 per share on sales of $204.7 million.

Now what: Cypress CEO Brad Buss stated, "We are seeing greater than expected weakness in our mobile handset revenues, mainly within Asia, due to a customer push out of certain new handset programs to Q1, as well as order reductions at various end customers in China to balance inventory levels." 

Worse yet, Buss added to the uncertainty by elaborating, "Greater than 70% of our revenue traditionally has come from distributors and the final week of September is our largest week of the quarter, and, as such, our revised revenue estimates could vary significantly."

As it stands, and considering Cypress is still losing money on a GAAP basis, it's hard to blame investors for running for the exits. Until Cypress can prove it has what it takes to achieve sustained, predictable profitability over the long term, it seems a wise decision to stay on the sidelines.

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Read/Post Comments (3) | Recommend This Article (2)

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  • Report this Comment On September 24, 2013, at 6:46 PM, rsinj wrote:

    We've seen this throughout the past year with Cypress before and/or after their earnings. At the end of the day the company has some issues, no doubt. However, the company is strong, they have good technology, they have lots of cash, are cash flow positive, and pay a hefty enough dividend to keep most patient investors very happy until the business turns around. Management has stated on prior calls this year that the dividend is untouchable - they will continue paying it and it is not in jeopardy.

    Below $10/share has been a clear signal to buy every time it's happened during 2013.

  • Report this Comment On September 24, 2013, at 9:49 PM, Leo686 wrote:

    Please get the right information about who is the CEO of Cypress Semi first, thanks!

  • Report this Comment On September 25, 2013, at 2:19 PM, bunngolf wrote:

    Much admired Dr. T. J. Rodgers Ph.D is the CEO. Brad Buss is CFO. Added shares today on temporary weakness.

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