Cypress Semi rises with SunPower, analyst praise

Shares of Cypress Semiconductor Corp. rose Friday as analysts were encouraged by presentations delivered by two of the chip maker's executives.

Additionally, shares of solar power products maker SunPower Corp., which frequently drive Cypress stock, climbed $5.84, or 7.7 percent, to $81.84, rallying along with the entire solar sector. Cypress has a 52 percent stake in SunPower.

In a note to clients, Cowen & Co. analyst John Barton said that speaking at Cowen's Annual Technology Conference in New York, Cypress Treasurer Neil Weiss offered a positive outlook.

Barton cited "the adoption of a flexible manufacturing strategy through (Cypress Semiconductor's) foundry partnerships to minimize volatility in high volume products."

He also noted the San Jose, Calif., company's core growth strategy centers on its Programmable System-on-Chip business. Cypress Semi's PSoC products are used in a wide range of devices including computers, consumer electronics and communications equipment.

Barton said these and other initiatives have enabled Cypress to reduce costs and improve its core semiconductor gross margins above its target of 50 percent. "We would not be surprised to see Cypress increase its gross margin target by at least several hundred basis points as a result of the ongoing transformation of the company," he wrote in a note to clients.

He also noted that shares of Cypress have been "extremely choppy" owing to the company's stake in SunPower. However, fundamentals in Cypress' core chip business remain relatively stable, he said.

Barton rates Cypress "Neutral."

Separately, Lehman Brothers analyst Tim Luke modestly raised his earnings estimates for the second quarter and 2008 after Cypress Chief Financial Officer Brad Buss spoke at a Lehman conference.

Luke cited "encouraging" order trends across several Cypress product areas including PSoC and communications. He maintained an "Overweight" rating.

Shares of Cypress climbed $1.32, or 5 percent, to $27.88. The stock has ranged from $18.42 to $42.79 over the past year.