We seem to be recovering from the BOFI fandango… meanwhile I’ve been wondering about the drag on SWKS. I’m aware of the GOPRO drag (commodity concerns on cams) and the general chipmaker stock concerns in the market, but it seems that SWKS should be doing significantly better than it has been for a few months.
Maybe we’ll see a pop/correction up when they release their nums later this month?? Thoughts?
Like it or not SWKS is thought of as an AAPL supplier. There is some trepidation on what AAPL will report and their guidance. That sentiment filters down to it’s suppliers. AAPL reports 10/17, that’s SWKS near term catalyst imo. SWKS reports 11/5.
Rob
FWIW, Skyworks already pre-reported earnings when they announced the acquisition of PMCS, so I doubt there will be much new come earnings (other than guidance, I suppose, and maybe an update on their IoT growth and some additional color).
I think the decline has a lot to do with slowing overall growth of the smartphone industry (SWKS’ participation in many manufacturers’ products is a negative here), fueled in part – as Rob mentioned – by AAPL skepticism. In truth, I suspect AAPL is rapidly stealing share from Android manufacturers and will experience above-industry growth, but that doesn’t necessarily help SWKS if it just takes business away from another of their customers. But total industry growth discounts the huge wave of upgrading that is likely to occur as people adopt LTE, and SWKS makes more money from LTE phones. Skyworks has said they expect to grow faster than the industry at large.
People also seem very skeptical of the PMCS acquisition, and I guess some skepticism is generally healthy regarding these things. But this isn’t their first rodeo: Skyworks is a pretty acquisitive company, and they’ve acquired and successfully integrated “complementary” businesses in the past, such as Advanced Analogic Technologies that made power management technology (battery charges, DC/DC converters, LED drivers – not RF stuff) a few years back. The reasoning was even very similar: enter new verticals, while filling in some additional pieces that would allow Skyworks’ existing solutions to add more value in the areas they were already serving.
I think people are looking at PMCS and seeing no synergies with Skyworks’ traditional mobile business, and therefore concluding it’s a Hail Mary trying to buy their way into a new industry as mobile growth slows. While it will get the company into new verticals, I do think that it also likely fills in some additional pieces for Skyworks’ IoT solutions business that will let them add more value. So to me, it looks like more of the same strategy, but with their small (but rapidly growing) IoT business rather than their mobile business.
But it’s hard to say how long it’ll take for the company to prove the worth of the transaction, even it’s successful: it’ll take some time to close, and then it’ll be at least 6 months for things to get integrated, and then probably multiple years for combined solutions to genuinely gain traction in new products. So it’s a long-term piece of the puzzle, and it’s hard to know how much ongoing proof the market will demand before it’s willing to give SWKS the benefit of any remaining doubts.
As I’ve said before, while their mobile business has done well and continues to benefit from tailwinds, I think a long-term investment in this company is about IoT, and so I think it makes sense to see the company apply its proven strategy to that business as well.
All just my opinion, though.
Neil
Long SWKS, AAPL
Semis have been in quite the downtrend and SWKS gets taken with the receding tide. Also no one seems to care about AAPL anymore and SWKS moves with AAPL similar to how AMBA moves with GPRO.
With the huge run up SWKS had in the first half of the year, I’m not surprised to see people selling to bank profits and for the stock to have lost its favor with buyers now.
Semis are starting to come back recently, and I think SWKS is one of the top chip stocks. AVGO and NXPI are interesting as well, and they seem to be attracting more attention at the moment in the market.
But I think SWKS will be just fine. Once the market realizes it can get back to risk on mode, the semis will catch a bid and SWKS will go with them. Or eventually the revenue growth they show if they continue executing will not let it be ignored anymore.
Long SWKS. But I don’t see anything that unique about the company. If they offer “solutions” instead of "component parts " others can do it too.
OEM love have multiple sources for parts. Then they are protected against natural disasters at one plant, and more importantly can play them off against each other. Allowing them just enough profit to survive but not enough to prosper. Take a good look at auto company suppliers.
Given the tough road for suppliers (who lack the ability to charge more for style, status or brand name) Skyworks has done well so I am inclined to trust their judgement about PMCS.
Is the acquisition big enough to set in force the usual rule that failure increases directly with the size of the acquisition? Sellers always know more about their company than buyers, and the larger the buy the harder to reconcile corporate culture.
Companies do get set in their ways,unable to change from the inside. Executives have dug themselves into their bunkers, each protecting themselves to the disadvantage of the company as a whole. So dynamite from the outside may be the only way to break the corporate logjam, (love mixed metaphors)
OEM love have multiple sources for parts. Then they are protected against natural disasters at one plant, and more importantly can play them off against each other. Allowing them just enough profit to survive but not enough to prosper.
This is no longer the prevailing attitude among most large manufacturers. I spent 30 years at a major aerospace firm where this philosophy was completely reversed. They came to the conclusion that it was to their advantage to work closely with fewer key suppliers rather than always playing one off against the others in order to get a marginal price advantage. Maybe not true for commodity parts, but even things like rivets for composite structures are highly proprietary.
The trend has been for many years to work with fewer suppliers and to continue to work with them based on long term relationships.
That being said, I don’t have any special knowledge about SWKS, but the CEO seems to have reinforced this kind of relationship with his assertion that SWKS is in the design phase sometimes up to three years in front of product introductions.
brittlerock: The trend has been for many years to work with fewer suppliers and to continue to work with them based on long term relationships.
This has actually been part of the Deming philosophy for decades. The idea is that with well managed and long-term commitments, the companies can better understand how to work together to not just meet but anticipate needs, working for an even better relationship and products.