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|Microsemi's Frustrating But Ultimately Undervalued Story Celine Handbags Online|
By Celine Bag Sale Stephen D. Simpson
Smallcap semiconductor company Microsemi (NASDAQ:MSCC) and I go back a ways.
I've owned this stock at various points over the last 16 years and have always
managed to make money doing so. I suspect a fair bit of those profits have come
from appreciating the company's qualities and prospects at times when the Street
was entranced by sexier growth names and then selling as the optimism built.
It's a little hard to really feel good about the December results that
Microsemi just posted. Sure, there are good reasons that results were just
inline and Celine Mini Belt Bag that guidance was a little soft, but I hold these shares for performance and not to hear good reasons for underperformance. So, what's a
Microsemi investor to do?
A Good Enough Q4 Don't get the idea that Microsemi had a bad quarter; the
company did what management basically said Celine Trapeze Bag it would. Revenue rose 31% from last year and 6% sequentially, boosted in large part by the communications sales that came with the acquisition
of Zarlink. Shipments in commercial aerospace and defense were both down double
digits, while the industrial/energy business was mixed.
This later point is not so shocking sentiment on chip stocks may be
improving, but earnings reports and guidance from the likes of Texas Instruments
(NASDAQ:TXN) and Freescale (NYSE:FSL) serve as reminders that that things aren't
Margins were something of a disappointment. I suspect that I underestimated
the cost ramifications of bringing in Zarlink, the disruptions in Thailand, and
the impact of utilization. Nevertheless, gross margin slipped about five points
sequentially on a GAAP basis. Microsemi reported a GAAP operating loss, while
"adjusted" income fell 13% sequentially.
Better Margins Are Going To Take Longer To Achieve Odds are that the biggest
disappointment on the Street is going to be with Microsemi's guidance. Defense
orders are shaky right now as customers like Raytheon (NYSE:RTN) and Lockheed
(NYSE:LMT) try to figure out the new realities of federal funding. At the same
time, it seems like the immediate potential of Zarlink to contribute to revenue
is a little less than previously thought.
On a more positive note, millimeter wave scanner shipments should be on the
way up in 2012 and it seems as though the company may pick up Cisco
(NASDAQ:CSCO) as a power over ethernet customer. It's also important to
recognize that booktobill Celine Classic Box Bag was above 1.0, and that's usually been a good predictor of better sales growth on the way at Microsemi.
On the margin side, the company has to absorb some consolidation expenses and
still deal with utilization and production rates that are fairly close to trough
levels. Management didn't back away from rather encouraging longterm targets;
they just believe it will take a Celine Mini Luggage few quarters longer to get there.
Microsemi's Best Attributes May Not Be In Vogue Now Compare Microsemi's
peaktotrough performance in sales and margins to the likes of Texas Instruments,
Linear Technology (NASDAQ:LLTC), and even Analog Devices (NASDAQ:ADI) and
Microsemi holds up quite well. Unfortunately, steadiness is rarely priced among
What investors seem to want today (and most days in tech) is strong growth
and Celine Handbags product cycle stories. Broadcom (NASDAQ:BRCM) has the strength of mobile devices
to build around, Silicon Labs (NASDAQ:SLAB) has a strong organic growth story in
touch controllers and TV tuners, and Atmel (NASDAQ:ATML) has its microcontroller
and maXTouch touch controller business to stoke expectations for 2012.
Now Microsemi isn't bereft of growth Celine Cabas Tote opportunities. It's just that body scanners, power over ethernet, and wireless LAN are more "on the come" and management's trimming of guidance
isn't going to get investors excited about the story. By the same token,
Microsemi spends quite a lot on R (more than 16% in this quarter), so it's not
like bulls don't have some reason for optimism about internal product
development fueling future growth.
The Bottom Line So, what to do with Microsemi's stock? Looking at alternate
chip stock ideas like Atmel, Broadcom, and Silicon Labs, the expectations for
Microsemi do seem relatively conservative. Bears will say that's richly
deserved, as the company's largest markets (defense and aerospace) don't have
the same endmarket growth. That's true, but it also overlooks the company's
growth prospects in communications, industrial, and medical applications.
For investors who believe Microsemi management can deliver on their longterm
gross and operating margin targets, these shares are worth something Celine Micro in the mid$20s today. That's less than the target I offered a few weeks ago, but I'm taking a much more conservative growth outlook now. Although
I get the appeal of more dynamic nearterm growth stories, history suggests that
the right time to buy Microsemi is when the Street is downcast on the company's