­­Cypress Reports Second Quarter 2015 Results

We are pleased to announce strong financial results for the second quarter of 2015, our first full quarter as a combined company. Our non-GAAP earnings per share of $0.15 represents a record relative to the last 10 quarters of the Cypress and Spansion pro forma combination. Our sales force is actively cross-selling products from our expanded product portfolio. As a result, we have begun to see an increase in new opportunities at top-tier customers, particularly in the automotive market.

We have continued to make excellent progress on integration.  We have exited 19 of the 27 sites planned for closure, reduced our combined headcount by 833 people and achieved $51.6 million in annualized synergies in the second quarter—ahead of our plan to achieve $160 million in synergies.

The combined Cypress-Spansion sales force ramped up its effort to cross-sell products from Cypress's expanded product portfolio during the second quarter, securing multiple key design wins and design opportunities at a pace that exceeded internal projections. Cross-selling is a key part of Cypress's stated goal to take advantage of product and business synergies to grow both our top and bottom lines. The effort was augmented by training more than 600 Cypress sales personnel and distribution partners at multiple regional Sales Conferences.

As one cross-selling result, a Tier 1 auto maker selected not only the Traveo™ automotive MCU, the HyperRAM™ and HyperFlash™ memories, and an analog Power Management IC (PMIC)—former Spansion products—but also a Cypress PSoC® programmable system-on-chip, for the infotainment cluster of its next-generation models. This win is particularly noteworthy in that former Spansion products opened the door for Cypress's longtime flagship PSoC products. This is a dynamic we expect will repeat itself as customers become more familiar with the synergies of our new product portfolio.

BUSINESS REVIEW

  • Our non-GAAP consolidated gross margin for the second quarter was 41.0%, meeting our expectations at this point in the merger. Excluding our Emerging Technologies Division (ETD), our core semiconductor gross margin was 41.6%.
  • Net inventory at the end of the second quarter was $300.9 million, down $88 million from the first quarter ($52 million excluding the impact of fair value inventory adjustment from the merger), as a result of our 2015 lean inventory initiative.
  • Cypress announced that its Board of Directors approved a quarterly cash dividend of $0.11 per share, payable to holders of record of the company's common stock as of the close of business on June 25, 2015. This dividend was paid on July 16, 2015.


NET SALES SUMMARY

(In thousands, except percentages)

(Unaudited)




THREE MONTHS ENDED





Jun. 28,


   Mar. 29,


Jun. 29,


Sequential


Year-over-

Business Unit


2015


2015


2014


Change


Year Change

PSD1


$202,806


$74,812


$74,676


171%


172%

MPD1,3


$261,407


$108,683


$85,582


141%


205%

DCD1


$19,087


$18,565


$17,989


3%


6%

ETD2


$7,728


$7,077


$5,354


9%


44%

Total


$491,028


$209,137


$183,601


135%


167%












Geographic











China and ROW


41%


49%


62%


-16%


-34%

Americas


11%


19%


17%


-42%


-35%

Europe


14%


16%


13%


-13%


8%

Japan


34%


16%


8%


113%


325%

Total


100%


100%


100%


0%


0%












Channel











Distribution


72%


74%


68%


-3%


6%

Direct


28%


26%


32%


8%


-13%

Total


100%


100%


100%


0%


0%












1.

PSD, Programmable Systems Division; DCD, Data Communications Division; MPD, Memory Products Division.

2.

ETD, Emerging Technologies Division includes businesses outside our core semiconductor businesses named in Footnote 1. ETD includes subsidiaries AgigA Tech Inc., Deca Technologies Inc., and our foundry business unit.

3.

Our second quarter 2015 net sales includes $6.25 million of legacy Spansion non-GAAP licensing revenue in MPD, APAC region and direct channel.


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