Today the street.com reported the reason for the decline as:
"The U.S. Department of Commerce placed restrictions on the Chinese smartphone and networking vendor smartphone maker after it allegedly violated sanctions placed on Iran, the Wall Street Journal reported.
ZTE sold 55 million smartphones last year, and the restrictions will likely impact at least 25 million to 30 million units during the 2016 second and third quarters, Rosenblatt wrote in a note, Barron’s adds.
The impact on Skyworks, which supplies radio frequency chips to smartphone makers, could range between $100 million and $200 million, the firm continued."
Now, I must say that 25-30mill units in 2016 will dent SWKS slightly, it seems losing the Galaxy s7 business is a MUCH BIGGER deal. Samsung sold 45million units from March-June 2015, so possibly 120million units for the full calendar year!!
Saul, you are the most familiar with SWKS, are you worried about these developments?
First off, real quick: I’m pretty new to investing and this board. Been reading and learning a lot, and I’ve got to say this is a fantastic board. Thanks to all here, especially Saul of course: you guys rock.
Second, my quick thoughts on this, based on my limited experience with the concepts Saul preaches in the KB:
SWKS is definitely at risk when it comes to it’s Chinese customers, obviously, and this risk is hard to predict or quantify.
Some perspective. This specific case, if the data is accurate and comes to fruition and we take the mean of the range, equates to a $150m hit to revenue, which is equivalent to approx. 4.4% of their latest TTM revenue figure (Q1 2016 TTM Revenue = $3380). Not sure what their FY2016 guidance is, gotta look that up. Anyway, as it so happens, it is similar to the decline in the price.
SWKS’s long-term prospects are still great and have not materially changed, IMO, due to this development. This event, albeit an undesirable one, is something outside their control and not due to their operations.
At a big picture level, I see this as a positive if you wish to start or add to your position.
Also, some disclosure, I just so happened to take my first leap and buy a position in SWKS today - put the order in yesterday (Yay!). I’m new and starting out rather small when it comes to the investment, so I’m using a plan whereby the orders only go in on Tuesdays, which brings the commission down to $3.95 per trade. Since I’m buying for the long haul, I’m not worrying about having to wait to make a trade. When my portfolio gets to more loftier levels, then maybe I can justify more timely trading.
By the way, the above are just thoughts and in no one way to be assumed as accurate (or smart). Looking forward to other experienced members’ thoughts on the topic.
it seems losing the Galaxy s7 business is a MUCH BIGGER deal. Samsung sold 45million units from March-June 2015, so possibly 120million units for the full calendar year!! Saul, you are the most familiar with SWKS, are you worried about these developments?
Hi Justin, If Aldrich said the following in the conference call a mere five plus weeks ago, I’d have to say that Skyworks DID NOT lose the Galaxy s7 business.
And if you look at our customer, Samsung, on our second largest customer, we’ve seen very high attach rate now with our more complex solutions in the Galaxy 7 and then in their emerging 16 platforms.
Clearly Samsung must have already ordered parts for millions of phones from Skyworks by then, and it’s hard to imagine that they hadn’t and Aldrich wasn’t aware. My only explanation for the teardown is that Samsung may have made 5% or 10% of their phones with another chip for export at a cheaper price somewhere, or, implausible as it may seem, that the person doing the teardown got a counterfeit Galaxy phone.
I opened this Motley Fool article with great trepidation, knowing that Skyworks was going to be listed. I gulped. I clicked…And nothing about SWKS. Curiouser and curiouser. The article only mentions the manufacturers that were replaced as InvenSense, Cirrus Logic, ST Micro, and TSMC.
I listened to the audio link you posted and as you say, they are full of confidence. Reiterating guidance, so no worries there.
Not exactly. The difference is subtle. They first issued their mid-term guidance of $8 per share during the Sept 2015 earnings call in early November 2015. They said that in the mid-term, which they defined as in 6-8 quarters into the future, they expect to hit $8/share. So what does hitting the $8/share mark mean? Does it mean a $8/share run rate or $8/share on a TTM basis? I would guess that they mean a $2/quarter adjusted EPS run rate.
Well, now we are almost 2 quarters past the time when they first announced their mid-term goal of $8/share, and the CFO said this week that they expect to hit $8/share goal in 2 years. Two years is 8 quarters from now. So have they delayed their goal of $8/share by 1.5 - 2 quarters?
Something certainly doesn’t seem right, when the company is saying, “look at our complex solutions for the Galaxy 7” and the tear down geeks are saying there are no solutions, complex or otherwise in the Galaxy 7.
I would sure like to get that issue solved. I can’t imagine management not understanding which phones they are in and which they are not in.
If they misspoke at their presentation then they should issue a correction and clear this up.
Mike
Late reply, but in case anyone’s reading this thread later – SWKS chips are not in the US-based version of the Samsung Galaxy S7, but SWKS chips/SOCs are in the S7 world-phone version – which will sell many more globally, according to projections.