Chip stocks continued their rocket ride as earnings reports trickled out in the past few weeks.
On Jan. 26, Irvine-based Broadcom Corp. beat analysts’ estimates and upped its outlook for the current quarter, sending its stock up about 20% in one day (see story, page 1).
The day before, Newport Beach-based Conexant Systems Inc. beat estimates, sending its stock up 7%. The rise pushed Conexant’s market value to more than $1.5 billion.
Broadcom and Conexant make communications chips used in set-top boxes, wireless phones and other devices.
You might have missed the news about Conexant’s 2003 spinoff Mindspeed Technologies Inc. of Newport Beach.
In the four days after Mindspeed’s Jan. 23 announcement on results for the December quarter, its stock shot up about 20% to around $340 million in market value.
Still, Mindspeed’s numbers weren’t as good as we’ve seen.
The company reported an adjusted $4.2 million loss for the quarter, versus a loss of $4 million in the prior quarter and a $12.3 million loss a year earlier.
The loss, though slightly worse than in the September quarter, was in line with what analysts had expected.
Still, the trend isn’t great for Mindspeed, which makes chips for telecommunications networks. Late last year, Mindspeed said it narrowed its loss to $4.3 million for the September quarter from $9.5 million in the prior quarter and more than $25 million in losses a year earlier.
Mindspeed’s revenue looked a bit better in the latest quarter.
The company reported sales of $33.2 million, up 7% from the prior quarter. The gain was at the high end of Mindspeed’s own expectations. Sales were up 26% from a year earlier.
Like former parent Conexant, Mindspeed is working through a turnaround. Conexant was able to return to profitability in the September quarter, three months ahead of schedule.
Mindspeed is set to return to profitability by the middle of this year, said Daniel Amir, an analyst with W.R. Hambrecht & Co. in San Francisco.
A disappointment in the latest quarter: wide area network chips, Amir wrote in a research note. Sales were “surprisingly weak,” he said, falling 16% from the prior quarter.
Mindspeed blamed the weakness on difficulties in getting enough supplies and on inventory adjustments, he said.
“While the story of the stock is about the WAN business, we believe that under execution on this front could result in poor financial results,” Amir wrote.
The company has things going for it. Mindspeed is at the right place at the right time with its chips for making phone calls via the Internet, especially in Japan, Amir said.
The Internet phone chips could be about 40% of sales in 2006, up from 35% in the recent quarter.
Amir still rates Mindspeed’s stock a “buy,” largely on the strength of these chips and the expected break-even point in the June quarter.
Who knows? Maybe Mindspeed could bounce back in the current quarter and surprise us by getting out of the red earlier than expected, just as Conexant did last fall.
Microsemi Gets Massengill
Western Digital Corp.’s Matthew Massengill, who stepped back as chief executive last year, is using the extra time on his hands to help out another company: Irvine-based Microsemi Corp.
Microsemi, which makes chips that regulate and condition electricity within electronics, announced late last month it had nominated Massengill to its board. He still needs shareholder approval.
Massengill stepped down last fall as chief executive of Lake Forest-based Western Digital, the disk drive maker. He’s now executive chairman. Longtime operations man Arif Shakeel is chief executive.
At Western Digital, Massengill is credited with driving a turnaround at the company that began in 2000.
Massengill also is on the board of Walnut-based ViewSonic Corp., a monitor maker.
Microsemi isn’t shy about going local for outside directors. Others include:
Paul Folino, chief executive of Costa Mesa-based Emulex Corp., which makes networking gear.
Thomas Anderson, former chief financial officer at Aliso Viejo-based QLogic Corp., Emulex’s key rival.
Dennis Leibel, director at Costa Mesa-based Commerce Energy Group, an energy reseller.
William Healey, former chief executive of Santa Ana-based Cal Quality Electronics Inc., a contract electronics maker.
Speaking of Microsemi …
The chipmaker came out with its own earnings late last month. They were mixed.
Microsemi said for the three months ended Jan. 2, adjusted earnings were $13.8 million, more than double that of a year earlier.
But that fell short of analysts’ estimates of $14.6 million.
Net sales for the quarter jumped 18% from a year earlier to $82 million. Analysts were looking for sales of $81.7 million.
The company has a market value of more than $1.5 billion.
