SWKS Buyback

Skyworks launches $400M buyback. Skyworks’ new buyback lasts through Nov. 10, 2017, and replaces a $300M authorization launched a year ago that had $62.6M remaining. It’s good for repurchasing 2.5% of shares at current levels. The buyback will be financed via working capital, Skyworks had $1.04B in cash and no debt as of Oct. 2.


Good move. I really like SWKS management. Today, Microsemi issued a PR that their offer is considered a “Superior Proposal” than the SWKS offer. There are three parties involved. Of course, PMCS wants the best possible price for a sale of the company so there is a strong incentive for the PMCS board to try to induce a better offer from SWKS. Microsemi wants to buy PMCS so the PR is pointing out that a “Superior Proposal” is on the table. Translation: PMCS take the better offer and since it is better, and you won’t need to pay the break up fee because the “Superior Proposal” clause will give you an out. Now, SWKS will try to argue that Microsemi’s slightly “higher” offer is not better (i.e. not a “Superior Proposal”) at all because there is stock involved which adds some uncertainly to the final offer price (if Microsemi’s stock dips then their offer ends up decreasing). SWKS may elect to let the courts decide if PMCS will need to pay SWKS the break-up fee. SWKS is also not going to pay an unreasonable amount to buy PMCS. I think SWKS’s new buyback program is a message to PMCS: we made you a fair offer so you should take it or else we will walk and instead buy back a bunch of our own shares. This is speculation on my part but it makes sense considering the the combined SWKS-PMCS will be a lot stronger than the combined Microsemi-PMCS. This game of poker continues…



Hi Saul!

Please correct me if I am wrong, but it appears that the total outstanding shares of SWKS is about 3 million higher than it was in mid 2013, despite past buy backs.

So, at $80/share, rough math says that $240 million of the $400 million buyback will be spent to get the share count back where it was in mid-2013…assuming no more shares are issued for management stock options, acquisitions, etc.

Buybacks can be great…especially when share prices are depressed; but if all the do is offset stock options, there is not a lot in them for current shareholders.

Note, I am NOT saying that this has been or will be the case for SWKS; rather, something to keep an eye on.

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(no position in SWKS, but considering one)


…and as some “grist” for the SWKS management option “mill”, please note some rather large “planned option sales” in the past year, especially from September on:


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Yet is was only up 8 cents after hours after the announcement, so would not expect much effect going forward.

Hey Murph,

I think of it this way. They are incentivizing management with stock options rather than with the $240mm in cash, but then buying back stock when it is cheap, not in excessive amounts, but enough to avoid diluting shareholders with stock and have some left over.

The $240mm would come out of the p&l somewhere. I’d rather have it be buybacks to cover the options than paid out as cash bonuses. At that point its an expense anyway, but the comp doesn’t align management as much with business performance.

I also think they are being good stewards of capital with the buyback. Not doing it just because everyone else is (and they are lately), but likely because shares are cheap and they have a ton of cash on hand.

As a contrast, IBM’s buyback this quarter were at significantly higher prices than now, while AMZN catapulted past them in cloud services with AWS. Oops.
I see SWKS as making smarter investments in long term performance with how they are handling it


Hi again all!

I ran across this post regarding stock option compensation from CMFFourthStooge on the Pro SWKS board:

"Does anybody know about those details for SWKS?

Most of the difference between GAAP EPS and Adjusted EPS is due to stock compensation. This difference is a pretty big percentage of Adjusted Earnings (see the table below).

0.18 0.42 0.24 57%
0.26 0.45 0.19 42%
0.32 0.53 0.21 40%
0.34 0.55 0.21 38%
0.32 0.48 0.16 33%
0.34 0.54 0.20 37%
0.44 0.64 0.20 31%
0.49 0.67 0.18 27%
0.40 0.62 0.22 35%
0.58 0.83 0.25 30%
0.90 1.12 0.22 20%
1.01 1.26 0.25 20%
0.85 1.15 0.30 26%
0.90 1.34 0.44 33%
1.18 1.52 0.34 22%

The quarterly weighted average shares to calculate earnings is in this table:

WA Shrs Mar Jun Sep Dec
2012 191.0 192.5 194.2 194.0
2013 193.1 191.2 190.3 191.2
2014 192.2 193.2 193.8 194.2
2015 195.2 195.4 194.8

The amount of earnings allocated to share compensation is pretty high and the amount of shares outstanding has stayed about the same.

So when the company says they’re buying back shares, they’re doing it to pay employees, not to return money to shareholders.

The number of shares is, however, not going up, which is the silver lining to this story.

DJ "

While his number of shares for 2013 don’t match other sources I have seen, I thought you might be interested in his analysis/thinking.

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A very negative take on buybacks: http://www.bloombergview.com/articles/2015-11-11/why-corpora…


I learned something today–I had always assumed share buybacks were a great thing for shareholders, but between Murph’s extremely helpful post and the article I linked above which illustrates the same thing–yeah, quickly starting to see buybacks in a new and much more unflattering light.

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Good article. That is the point I was making about timing the buyback in a way that makes sense regarding the share price.

Why invest in a company who can’t even invest in themselves at an attractive price or come up with a better way to use their capital?

I do think this SWKS buyback is pretty benign though. Would be nice to see someone else buying besides the company though so the share price starts moving again :wink:

Hi Murph,

While his number of shares for 2013 don’t match other sources I have seen, I thought you might be interested in his analysis/thinking.

The only source I use is the company’s earnings releases. I checked again to see if I made a mistake, and I didn’t. The numbers are correct.

There may be another reason your numbers are different. You may have used YTD numbers, which are different that the quarterly numbers.

You may also have used basic shares instead of fully-diluted shares. I only use fully-diluted shares, because it reflects all the potential shares that could be outstanding in the event that warrants or convertibles are exercised and become standard shares.

In the long run it would be nice to see the share compensation become a smaller proportion of adjusted earnings, even if it keeps going up.



All good points, DJ!

My “research” was from a third party that purports to supply shares outstanding/year…not sure which they used, but I like your way better…a clearer picture.

Thanks again!
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