Please ensure Javascript is enabled for purposes of website accessibility

Cypress Semi Posts Solid Results Ahead of Its Infineon Acquisition

By Steve Symington - Jul 25, 2019 at 7:08PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The semiconductor manufacturing leader is being acquired, but that doesn't mean investors should stop paying attention.

Cypress Semiconductor (CY) released solid second-quarter 2019 results on Thursday after the markets closed. The semiconductor manufacturer once again highlighted revenue and earnings above the midpoints of its latest outlook ranges, led by the relative strength of its Wi-Fi and Bluetooth offerings to support growth in the lucrative Internet of Things (IoT) market vertical.

Of course, Cypress stock is little changed because the company recently agreed to be acquired at a hefty premium by Germany's Infineon Technologies (IFNNY 0.94%). But the acquisition isn't expected to close until the end of this calendar year or early 2020. So, in the meantime, let's take a closer look at what Cypress accomplished this quarter.

Dark chess pieces on left with light pieces on right, single piece with color split down the center in the middle.

IMAGE SOURCE: GETTY IMAGES.

Cypress Semiconductor results: The raw numbers

Metric Q2 2019 Q2 2018 Change

GAAP revenue

$532.2 million

$624.1 million

(14.7%)

GAAP net income (loss)

($12.7 million)

$27.7 million

N/A

GAAP earnings (loss) per diluted share

($0.03)

$0.07

N/A

Data source: Cypress Semiconductor. 

What happened with Cypress this quarter?

  • On June 3, Cypress entered into a definitive merger agreement through which it will be acquired by Infineon for $23.85 per share in cash, good for an enterprise value of roughly $10 billion. 
  • Note last year's second quarter included $49.5 million of revenue from Cypress' NAND business, which the company divested in early April to a five-year joint venture (of which Cypress owns 40%) with SK Hynix System IC. Excluding those sales, reported revenue would have declined a more modest 7.4%.
  • Adjusted for items like stock-based compensation and restructuring expenses, Cypress' (non-GAAP) net income was $97.2 million, or $0.25 per share, down 24.2% from $0.33 per share in the same year-ago period.
  • Both the top and bottom lines were above the midpoints of Cypress' guidance provided in April, which called for revenue of $515 million to $545 million and adjusted earnings per share of $0.22 to $0.26.
  • Adjusted gross margin expanded 110 basis points year over year to 47.2%, within guidance for a range of 47% to 47.5%.
  • By business segment:
    • Memory products division (MPD) revenue fell 30.4% to $178 million (primarily due to the NAND divestment)
    • Microcontroller and connectivity division (MCD) declined 3.9% to $354.2 million

What management had to say

CEO Hassane El-Khoury stated:

Cypress' world-class connect and compute solutions continue to gain strong momentum, including in IoT where Cypress' revenue was up 30% sequentially in Q2, driven by strength in Wi-Fi/Bluetooth combos as well as stand-alone Bluetooth. Cypress also continues to execute well in automotive where Cypress' revenue grew in Q2, both annually and sequentially, as our per-vehicle content continues to outgrow vehicle unit production levels.

Looking forward

Given the impending acquisition, Cypress won't be holding its usual quarterly conference call and will no longer provide forward guidance. But even if the acquisition doesn't close as expected, investors should be pleased Cypress essentially delivered as promised and has continued to steadily push forward its strategic growth initiatives.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Cypress Semiconductor Corporation Stock Quote
Cypress Semiconductor Corporation
CY
Infineon Technologies AG Stock Quote
Infineon Technologies AG
IFNNY
$25.80 (0.94%) $0.24

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
336%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.