Austin's Silicon Labs reports record revenue

Chipmaker says its Internet of Things, infrastructure division helped bolster third-quarter sales.

Posted October 26th, 2016

Austin chipmaker Silicon Labs reported earning record revenue in its third quarter of $178 million, up 14 percent from the same quarter a year ago.

These sales gains were fueled by growth in the company's Internet of Things and "infrastructure" division, which includes its data center products. 

Silicon Labs makes silicon chips and software that are used in a variety of devices, from televisions to smart energy meters and data centers. 

Its major customers include Cisco, Fitbit, LG Electronics and Samsung. 

The 20-year-old company is headquartered in downtown Austin and employs about 630 people locally.

The company's net income, or profit, in the third quarter also more than doubled to $20 million, or 47 cents per share. When adjusted for one-time gains and costs, the company reported a profit of $32.4 million, or 77 cents per share. 

The results exceeded Wall Street expectations. The average estimate of six analysts surveyed by Zacks Investment Research was 64 cents per share. 

Silicon Labs said it expects its fourth quarter revenue to be $176 million to $181 million, roughly the same guidance it gave for the third quarter. Net income is expected to lower than the third quarter. 

Silicon Labs' shares closed Wednesday down $1.80, or 2.8 percent, at $60.95.

However, the company's share price has soared 29 percent since the beginning of the year. And in the past 12 months, the stock has climbed 35 percent. 

During a conference call with analysts on Wednesday morning, Silicon Labs executives said their third-quarter sales numbers were driven by the company's infrastructure division, which "significantly exceeded" their expectations, and Internet of Things, which saw growth stemming from industrial customers.

Internet of Things is a chip industry term for non-computing devices connected to the Internet, such as Nest thermostat. Silicon Labs has targeted Internet of Things as a major growth area for the company. 

For years, the chipmaker has been trying to diversify its portfolio beyond its legacy businesses of TV and radio tuners and modems. CEO Tyson Tuttle said on a Wednesday morning conference call with analysts that their efforts to gain business in Internet of Things and in its infrastructure division are paying off. 

"It takes some time to turn the ship," Tuttle said. "For the last four years we have been investing and are now seeing the fruits of those investments."

The company's Internet of Things revenue was $81.5 million in the third quarter, a 25 increase from the same quarter a year ago. And its infrastructure revenue was $38.3 million, up  23 percent from the same quarter a year ago. 

Internet of Things revenue now makes up 46 percent of the company's revenue. 

The company also announced this week that it has changed some of its compensation packages for top executives in the event that there was an acquisition of the company. 

That set off speculation that a buyer was interested in Silicon Labs. Executives tried to quell these rumors on Wednesday by saying that no offer had been made, that the changes were the result of a new chairman of the compensation committee wanting to make changes to be more in line with industry standards. 

"The changes were proposed to minimize unnecessary distractions to key members of management in the context of any M&A event," said John Hollister, Silicon Labs' chief financial officer.