3). Product portfolio: Fairchild is highly dependent on high-end smartphone sales within the mobile computing space. We all have witnessed how both Apple and Samsung called for cuts in orders once the sales of their flagships weren’t as per expectation. Fairchild needs to reduce its dependence on this segment and balance the product mix.
Competitors
Microchip Technology Inc. (NASDAQ:MCHP) and Texas Instruments Incorporated (NASDAQ:TXN) are companies in the semiconductor market with whom Fairchild competes in one way or more.
Microchip Technology Inc. (NASDAQ:MCHP) recently reported great 1Q 2014 results, which saw net revenue up by 31.4% on a year-over-year basis to $462.8 million. Leaving out non-recurring items, adjusted net income for the quarter was up by 24.3% from the year-ago quarter to notch a record high of $120.4 million, or $0.57 per share. The year-over-increase in non-GAAP earnings was primarily attributable to solid top-line growth.
For the next quarter, management expects sales figures to be in the $472 million to $490.6 million range, while GAAP gross margin is expected to be in the range of 57.6% to 58.2%.
Also, the non-GAAP earnings estimate for Q3 is expected to be in the rage of $0.58 to $0.62, with a mid-range of $0.60 leading to a P/E of 17.1. In addition, considering the size of the dividend that company has been paying at a fairly consistent basis and its current share price, I find Microchip to be a good stock for investment.
Texas Instruments Incorporated (NASDAQ:TXN) declared its 2Q 2103 results last month and earnings missed the consensus estimate mark of $0.46 per share by $0.04. Revenue inched up 5.6% sequentially but was 8.6% lower as compared to last year to $3.0 billion.
The company expects third-quarter revenue in the range of approximately $3.0 billion to $3.1 billion and EPS for the quarter is estimated to be in range of $0.49 to $0.57, the midpoint being a tad bit lower than consensus estimates of $0.56 per share.
Texas Instruments is actively spending on R&D for several high-margin, high- growth segments of analog and embedded-processing markets, which would gradually be increasing its exposure to automotive and industrial markets and reducing exposure to the volatile consumer/computing space.
In my opinion, the company is making the right moves of reducing exposure to volatile computing space.
Conclusion
Fairchild is struggling now, but the company could probably turn around if its various strategies play out. The stock is trading very close to the lower range of its 52-week band and it might be a good time to start a small long position.
ANUP SINGH has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
The article This Semiconductor Company Can Bounce Back originally appeared on Fool.com and is written by ANUP SINGH.
ANUP is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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