'Cypress 3.0' Strategy Bearing Fruit

Release time:2017-04-27
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source:EETime
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Cypress Semiconductor Corp. reported record first quarter sales that beat analysts' expectations Thursday (April 27), offering tangible evidence that the company's strategy to target markets growing faster than the overall semiconductor industry is bearing fruit.

"Our revenue strength in the first quarter was across end markets, particularly from IoT, and NOR memory was stronger than we expected," said Hassane El-Khoury, Cypress president and CEO, in a conference call with analysts following the quarterly report.

El-Khoury said automotive was Cypress's strongest end market in the first quarter, with record sales and design activity. He said automotive sales now make up about one-third of Cypress's total revenue, up from just 11 percent of the firm's revenue in 2011.

El-Khoury, who took the helm of Cypress last August following the April resignation of Cypress Founder and longtime CEO T.J. Rodgers, calls his strategy for realigning the company around core growing markets "Cypress 3.0." The strategy revolves around both organic and inorganic growth, through both internal product development and deals such as the acquisitions of Spansion in 2015 and Broadcom's wireless IoT business last year.

Thad Trent, Cypress's chief financial officer, said on the analyst call Thursday that the strategy is resulting in revenue growth, gross margin improvement and operating leverage across the company.

Hassane El-Khoury
Hassane El-Khoury

"Our Q1 results reflect the actions we have taken to reorganize the company to align our solutions, our investments and our corporate structure with our go-to-market plan and our focus on high-growth areas of the automotive, industrial and consumer markets, including the Internet of Things and USB connectivity," El-Khoury said.

Cypress reported first quarter sales of $531.9 million, the highest quarterly revenue that Cypress has reported since spinning off SunPower Corp. several years ago.

First quarter sales were up slightly compared with the first quarter of 2016. Cypress reported a loss for the quarter based on generally accepted accounting principles (GAAP) of $45.8 million, narrowed from a GAAP net loss of $72.4 billion in the year-ago quarter.

Cypress's sales for the quarter exceeded both the company's own estimates and those of Wall Street's. The company's pro forma earnings per share of 13 cents also exceeded consensus analysts' expectations by a wide margin.

For the second quarter, Cypress said it expects sales to be between $530 million and $560 million, the midpoint of which is well above consensus analysts' estimates.

El-Khoury said Cypress expects continued strength in the second quarter in products "across the board." He noted that the company's status as a supplier to the automotive industry gives it great visibility into sales in coming months.

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After a bitter and contentious proxy fight, shareholders of Cypress Semiconductor Corp. voted Tuesday (June 20) to elect two board members proposed by founder and longtime T.J. Rodgers to the company's board of directors. Eric Benhamou, whom Rodgers blamed for not recognizing or correcting what Rodgers called a conflict of interest involving former chairman Ray Bingham, failed to win re-election. Bingham abruptly resigned from Cyrpess's board earlier this month, citing the ongoing proxy fight with Rodgers, who remains the largest individual stockholder in Cypress. Camillo Martino and J. Daniel McCranie, both nominated by Rodgers, will join re-elected Cypress board members W. Steve Albrecht, Hassane El-Khoury, Oh Chul Kwon, Wilbert van den Hoek and Michael Wishart, Cypress said in a statement. Rodgers, who founded Cypress in 1982, filed suit against his former company earlier this year, alleging conflict of interest by Bingham for his ties to Canyon Bridge Partners, an equity investment firm backed by the Chinese government that is in the process of acquiring Lattice Semiconductor Corp. Cypress had previously considered an acquisition of Lattice. According to CypressFirst, a shareholder organization set up by Rodgers to support his campain to replace Bingham and Benhamou on the Cypress board, preliminary estimates indicate that Martino and McCranie each received more than 148 million votes, while Benhamou received about 60 million. T.J. Rodgers "We are grateful to Cypress stockholders for their support of our two candidates," Rodgers said in a statement. "I can now get back full-time to my work on innovative technologies for the IoT and in alternative energy and let the Cypress directors do their work." In a separate statement, Cypress welcomed Martino and McCranie to the board. "“We appreciate the feedback we received from our stockholders and want to welcome Dan and Camillo to the board," the statement read. "We look forward to working collaboratively with them to keep our Cypress 3.0 strategy moving forward and create additional stockholder value." Cypress also thanked Benhamou for his years of service to the company.
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