Silicon Laboratories (NASDAQ:SLAB) reported second-quarter results before Wednesday's opening bell. The semiconductor designer beat Wall Street's earnings expectations, but followed up with disappointing guidance for the next quarter. Shares were down 10.4% at 1 p.m.
Second-quarter sales of $164.9 million represented a 6% boost over the year-ago quarter. Adjusted earnings declined 3%, to $0.56 per diluted share. The sales result was at the lower end of the official guidance range, while earnings landed at the top end of guidance. Analysts had been expecting earnings of $0.53 per share on $166.5 million in sales, making for a mixed quarter.
"We delivered another record quarter, and are encouraged by the traction we are seeing in our strategic growth businesses including our Internet of Things, Infrastructure and Broadcast automotive products," said Silicon Labs CEO Tyson Tuttle in a press statement. "However, we believe macro trends continue to stifle the global demand for TVs, with the latest market estimates calling for a reduction in unit demand for 2015."
Tuttle expects his broadcast division's sales to fall roughly 15% in the third quarter, running counter to typical seasonality patterns. Most years, builders of consumer electronics would use this period to stack up on components for the next holiday-season manufacturing push. That doesn't seem to be happening in 2015.
With that TV-based trend in mind, Silicon Labs set the midpoint of its third-quarter sales guidance at $153.5 million. Adjusted earnings are now expected to land near $0.42 per share. The current analyst view calls for earnings of $0.60 per share on sales of $174 million in the third quarter, so the new guidance is drastically lower.
The company has been describing itself as "a leading provider of microcontroller, wireless connectivity, analog and sensor solutions for the Internet of Things (IoT)" since the fourth quarter of 2014. That focus has started to show in the company's financial reports.
IoT products accounted for $68.9 million of Silicon Labs' second-quarter sales, or 42% of total revenues. In the first quarter, which was the first period to report IoT results separately, the division delivered sales of $60.9 million, or 37% of total revenues. A 13% sequential improvement is nothing to sneeze at, but IoT sales still aren't growing quickly enough to make up for the expected weakness in broadcast components.