Tuesday, January 12, 2010

Synaptics Inc. (NASDAQ: SYNA): Q2 Earnings Preview 2010

Synaptics Inc. (NASDAQ: SYNA), a leading developer of human interface solutions for mobile computing, communications, and entertainment devices, is scheduled to report financial results for the second quarter of fiscal 2010 on Thursday, January 21, 2010, after the close of market. Analysts, on average, currently expect the company to report earnings of 56 cents a share on revenue of $131.24 million. In the year ago quarter, the company reported earnings of 84 cents per share on revenue of $141.52 million.

Synaptics creates interface solutions for a variety of devices including notebook PCs, PC peripherals, digital music players, and mobile phones. Synaptics has two business segments, Personal Computer and Digital Lifestyle Products.The TouchPad™, Synaptics' flagship product, is integrated into a majority of today's notebook computers. Since going public seven years ago, Synaptics has grown from 100 million to $473 million in revenue, representing compounded annual growth of 25%.

Late in October, the Santa Clara, California-based company reported quarterly results that topped Wall Street estimates. Net income declined to $9.80 million or $0.27 per share, compared to net income of $12.71 million, or $0.36 per share, in the year-ago quarter. On a non-GAAP basis, net income was $17.25 million or $0.48 per share, compared to net income of $17.87 million, or $0.50 per share, in the previous year quarter. Non-GAAP net income excluded non-cash charges for interest expense, share-based compensation, an investment write down, and a one-time income tax charge. Quarterly revenue increased 3% to $119.59 million from $115.86 million in the comparable quarter last year. Analysts, on average, expected the company to earn 42 cents per share on revenue of $116.39 million for the quarter.The revenue mix from PC and non-PC applications was approximately 62% and 38% respectively.

On a non-GAAP gross margin rose slightly to 40.8% from 40.6% in the prior quarter.

The company ended September with total cash and short-term investments of $197.6 million, up from $192 million at the end of June and had a backlog of $71 million in orders. Cash flow from operations was $29.9 million for the quarter.

The company expects to report second quarter revenue in the range of $128 million to $134 million. For the full year 2010, the company reaffirmed its previous revenue guidance range of $495 million to $525 million.

Synaptics has been investing heavily in value engineering and material science, working with its partners to aggressively take costs out of capacitive Touchscreen in order to bring prices down and to fuel mass market adoption. The firm recently announced that the Google Inc.'s (NASDAQ: GOOG) much anticipated smartphone "Nexus One" uses its ClearPad 2000 capacitive touchscreen sensor. Additionally, the company recently introduced its Fuse product, which integrates a number of interface technologies -multitouch capacitive sensing, haptic feedback, 3-D graphics, and force, grip, and proximity sensing.

The company has done an excellent job of positioning itself as the leader in its niche industry. It is poised to benefit from a spurt in demand for consumer electronics based upon touch technology. Market research firm Gartner's new forecast indicates mobile PC shipments are on pace to reach 162 million units in 2009, a 15.4 percent increase over 2008. In 2010, mobile PC shipments are expected to reach 196.4 million units.

The company's stock currently trades at a forward P/E (fye 30-Jun-11) of 13.93 and PEG ratio (5 yr expected) of 0.80. Symaptics has a healthy balance sheet and strong cash position with net cash per share of $5.81. In terms of stock performance, Synaptics shares have gained nearly 70% since the beginning of the year.

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