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."
Fool contributor Anders Bylund has no position in any stocks mentioned. The Motley Fool recommends Cypress Semiconductor. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.