Careful with that axe, Eugene
The stars are screaming loud"
-- "Careful With That Axe, Eugene," by Pink Floyd
You see, Fairchild isn't exactly a master of cost-cutting. As first-quarter sales rose 9.2% year-over-year, operating costs raced ahead at a 12.9% clip. This was just about what analysts had expected, but investors seem concerned about the future. Costs will continue to grow faster than sales, and adjusted profits aren't expected to grow at all in the second quarter.
The company has a healthy backlog from which to fill orders, so there's plenty of visibility into coming sales. With a bit of judiciously applied fiscal discipline, that position should result in strong profits. Fairchild isn't aiming for such a target, though.
That could be a fatal mistake, considering the current state of the analog chip industry. Texas Instruments
Buyouts aren't every CEO's preferred exit strategy, of course, but it would be silly not to take advantage of the prevailing winds while they last. Add Fairchild Semiconductor to your watchlist, and see whether Eugene ever takes his axe to the company's rising costs.