Cypress Semiconductor (NASDAQ:CY) released its second-quarter earnings last week, and investors were pleased with the results, for the most part. Earnings came in well above estimates at $0.16 per share, as analysts were expecting $0.12 per share. Profits were boosted by an improved gross margin and continued cuts to operating expenses.
The highlight of Cypress' earnings report was the chance to hear CEO T.J. Rodgers answer questions. He never fails to amuse, enlighten, and ensure investors that his company is well-positioned against competitors like Synaptics (NASDAQ:SYNA). Following are three of his best quotes from last weeks earnings call.
Sorry western world, your holiday isn't that important anymore
Cypress sees a lot of strength coming in the second half of the year. Particularly, it expects to see sequential revenue growth in the fourth quarter from the third quarter -- a period that's historically flat or down.
There are a number of factors management sees contributing to better growth in the fourth quarter. EVP Dan McCranie pointed out that industrial, automotive, telecommunication, and high-end computation should all make up for a decline in the consumer space.
Rodgers doesn't think the consumer market is going to fall off as much as it has in the past because of one main reason: "I hate to tell everybody, but Christmas ain't the most important holiday in electronics anymore. It's called Chinese New Year, and we are building all the way through the fourth quarter for that."
Indeed, Cypress has been pushing hard to win share in China. Last quarter, it won new designs with ZTE and Huawei, and it plans to expand its total addressable market in the country in the near future.
Finding the next iPod
Cypress has done an excellent job winning designs in the smart watch category. Its low-power solutions fit nicely with what wearable OEMs are looking for, and the company is able to make them inexpensively. On the low end (smart pedometers), Cypress sells chips for just $0.30 apiece. On the high end, it's got the Gen5 chip, which is actually capable of being used in smartphones, but draws very little power.
Rodgers has no idea how the market is going to shake out, or what features will win. He does think it has the potential to be big, though, as it reminds him of another product feature Cypress worked on.
"This reminds me of 2005, when Apple came in and said, 'We want to get rid of buttons on our iPod and we want to have capacitive touching.' And then they created the so-called click wheel, which was basically a bunch of buttons, and that thing ramped from 0 to 17 million units in one quarter."
When that new feature comes out, and OEMs need to ramp up, Rodgers sees Cypress uniquely positioned with its PSoC platform. It's a lot easier to develop software quickly than it is to develop new hardware, and that's the advantage Cypress has with a programmable product.
The last one standing in a post-nuclear-apocalypse touchscreen world
Rodgers had some nice words to say about Synaptics and its recent string of acquisitions. Synaptics acquired Validity Sensors last year for its fingerprint scanning technology, and Renesas' display driver business last month.
Cypress has responded by partnering with IDEX for its fingerprint recognition IP, but Rodgers isn't a believer in Synaptics' plans with Renesas. He thinks the need for two different technologies to make one integrated chip will hurt margins too much. He also admits that he could be wrong.
But, when it comes to taking on Synaptics and the rest of the competition in the touchscreen market, Rodgers is unshaken.
"We are going to win in TrueTouch. Plain and simple. That's our goal, and I've been saying that all along. And we plan on being here after the nuclear war is over. We plan on being the little crawly creatures that crawl up and conquer the world. That's what's going to happen in TrueTouch. We're going to win."
The nuclear war that Rodgers is talking about is unclear, but he is awfully confident that his company is resilient enough to bounce back from any blows the competition might send its way.
Put our money where your mouth is
Cypress is making excellent progress in China and in the wearables market. Increased consumerism in China can help the company grow its fourth-quarter revenue significantly, but winning the design for the next revolutionary touch interface (like Apple's click wheel innovation) will do a lot more than a few design wins in China.
Meanwhile, competition from Synaptics remains fierce, as the rival continues to post excellent results. While Rodgers is confident he will outdo Synaptics in the long run, it's yet to be seen whether he's actually capable of pulling it off.
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Adam Levy 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.