SEMICONDUCTORS

Austin-based Cirrus Logic's sales, profit decline due to Apple sales slowdown

Austin-based chipmaker Cirrus Logic reported fourth-quarter financials on Tuesday. 

Posted April 26th, 2016

Story highlights
  • Slowing Apple iPhone sales has a ripple effect on Austin's Cirrus Logic. 
  • Cirrus Logic's sales and profit are down, but CEO predicts "strong growth" later in the year. 

CIRRUS LOGIC

WHAT THEY DO: 

A supplier of audio and voice chips for smartphones and other products, such as headphones. The company is headquartered in downtown Austin and employ 1,262 people worldwide, with 686 in Austin. 

QUARTER: 

Fourth quarter and full year results

THE RESULTS: 

Cirrus Logic has hit a rough patch. The company's sales in its fourth quarter were $232 million, which fits with what the company had estimated. It was a 9 percent decrease from the same quarter a year ago. 

Net income, or profit, was dropped in half from the same period a year ago to $14 million, or 21 cents per share. 

The company’s adjusted net income, after excluding the impact of certain expenses, was $24.9 million or 38 cents per share. For the full year sales were up 28  percent. 

WHAT IT MEANS: 

Cirrus Logic’s biggest customer is Apple Inc., which is experiencing its own sales slowdown, reporting on Tuesday for the first time since 2003 a year-over-year sales decline due to slowing iPhone sales. (Technically Cirrus Logic does not disclose who its biggest customer is, but it is well-known within the industry that it is Apple. )
When Apple sells fewer phones, Cirrus Logic ships fewer audio chips for those phones. “As expected, sales were impacted by short-term weakness in portable and audio,” CEO Jason Rhode said in a letter to shareholders. 

The company is trying to diversify its products and customer base beyond smartphones, which make up about 80 percent of its revenue, but those sales were flat year-over-year. 

INVESTOR REACTION: 

The company’s fourth-quarter results beat analyst expectations of 37 cents per share, according to a poll by Thomson Reuters. Still, shares dropped more than 4 percent in after-hours trading Tuesday.. 

PREDICTIONS FOR THE REST OF THE YEAR: 

The sales slump could continue. The company is projecting sales of between $220 million and $250 million, which would be a 17 percent decline from the same quarter a year ago. 

The CEO is promising "strong revenue growth" later in the fiscal year, and analysts are excited about the prospect of a new line of voice processing chips that are supposed to give a better audio experience on smartphones. 

Dougherty and Co. analyst Charles Anderson previously described the product as replicating a $300 noise-canceling headphone on “a pair of cheap earbuds.” 

When pressed for a status update on this new product during its fourth-quarter conference call, Rhode said that he expects products that use this chips to be available to consumers this year. 

But he said it wouldn’t be a “huge contributor” to Cirrus Logic's bottom line “right out of the gate."


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