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NasdaqGS : SWKS. By: Liam Reilly . Performance. 69.59% 1-yr return vs 18.48% for S&P 500 24.26% for S&P 500 IT sector 37.02% Philadelphia Semiconductor Index (SOX). Industry Overview. Semiconductor Industry Integrated circuits, memory chips, microprocessors
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NasdaqGS: SWKS By: Liam Reilly
Performance • 69.59% 1-yr return vs • 18.48% for S&P 500 • 24.26% for S&P 500 IT sector • 37.02% Philadelphia Semiconductor Index (SOX)
Industry Overview • Semiconductor Industry • Integrated circuits, memory chips, microprocessors • Vital component in all electronic devices like computers, phones, tablets, as well as services such as telecommunications, internet networks, and broadcast providers • Highly correlated with global GDP, creating cycles around macro conditions • Face rapid technological change, so companies must invest heavily in research and development
Industry Drivers • Traffic Growth • Global IP traffic has increased more than fourfold in the past five years, and will increase threefold over the next five years • Consumer Internet video traffic will represent 69% of all consumer Internet traffic in 2017, up from 57% in 2012 • Mobile data traffic will increase 13-fold between 2012-2017 • Device Growth • Number of devices connected to IP networks will be nearly three per capita in 2017, up from 2 currently. • Traffic from wireless and mobile devices will exceed wired devices by 2017. • Growing variety of devices now being connected, such as thermostats, meters, wearables, medical devices, automotive, and home appliances.
Company Overview • Skyworks is a provider of high performance analog semiconductors • 76% of revenue related to radio frequency components in cellular devices • Utilize a “fab-lite” manufacturing model • 51% of revenue from top two customers, Foxconn (Apple) and Samsung • Outside of Apple and Samsung, they have a solid and growing customer base • Cisco, Ericsson, Fujitsu, GE, Google, HTC, Huawei, Lenovo, LG, Nest • Also provide components to Qualcomm and MediaTek • 93% of revenue comes from Asia, 59% of those sales in China • 4% from the Americas, and 3% from Rest of World
Company Overview • RF Front Ends • Power amplifiers • Carrier Aggregation antenna switches
SkyOne • Fully integrated RF solution • Combines all radio frequency and analog content between the antenna and transceiver • Fully customizable to OEM’s requirements/design • All in one design reduces cost, design burden, power consumption, board size, and time to market for OEM • Provides a “winner take all” solution for RF components in new devices • Earned design wins with HTC Desire and Samsung Galaxy Express 2 • 2nd generation design ramping up this year, so we expect more design wins
“The billions of connected devices that make up the Internet of Things will be enabled by a combination of sensors, microcontrollers, and most importantly for Skyworks-connectivity and power management solutions-dramatically expanding the markets we serve.” – David Aldrich, CEO
Growth Drivers • More devices are know connecting to Internet networks wirelessly • RF technology is the connective link between the device and the internet
Growth Drivers • Increasing Addressable Content in Handsets • Growing connectivity requirements and complexity is increasing the demand for RF technology • Edge, LTE, GPS, WiFi, Bluetooth, NFC, etc
Financial Analysis • No debt on balance sheet • $650 million in cash • Strong cash flow from operations • $500 in 2013, up from $285.2 in 2012 • $250 million share buyback program • $0.11 dividend announced for first time ever • To be paid in Q3 2014 (June 30) • Strong margin growth
Risks Macro Slowdown Supply Chain Disruption Customer Concentration Internet of Things doesn’t plan out as expected
Decision Buy Price Target: $44 est. vs $ 36.89 actual (04/10/14) Strong Growth Trends Attractive Valuation Returning Cash to Shareholders Broad exposure to a secular growth trend
