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Cypress Semiconductor (NASDAQ:CY) this morning reported results for the fourth quarter of 2013.

Non-GAAP earnings increased 80% year-over-year to $0.09 per share. Revenue declined 7% to $168 million. Analysts were looking for earnings of $0.08 per share on $167 million in sales. Cypress shares traded 1.5% higher in early market action, driven by the slight outperformance.

Rising earnings despite slowing sales may look like a paradox, especially since the company's gross margins remained stable at 51%. Management explained these conflicting trends with lower operating costs. Operating margins support this hypothesis, rising from 4.4% to 9.4%

The maker of mixed-signal and programmable chips exited the quarter with the highest book-to-bill ratio in nearly two years. The programmable systems division led the way in this measure of forward sales visibility, reporting a book-to-bill ratio of 1.15. Cypress' distributor partners reduced their inventories to the lowest levels in three years -- another sign of healthy demand.

"We expect less-than-normal seasonal revenue declines in the first quarter of 2014," said Cypress CEO T.J. Rodgers in a statement. "Our design win pipeline for our new TrueTouch touchscreen products is finally beginning to recover. We expect our revenue to remain in a seasonal trough in the first quarter and then to increase during the rest of 2014."


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