Ikanos, Mindspeed Feel the Pain
Ikanos stock fell a whopping $2.76 (20%) to $11.09 by midday, while Mindspeed was down 26 cents (14.5%) to $1.53.
Granted, most tech shares were down today. Still, Ikanos and Mindspeed dealt out some surprises with their earnings that apparently helped topple their stocks.
Ikanos actually beat analyst expectations. For its second quarter, which ended July 2, the company reported losses of $2.2 million, or 8 cents per share, on revenues of $41.2 million compared with first-quarter losses of $1.4 million, 6 cents per share, on revenues of $35.8 million. (See Ikanos Reports Q2.)
For its second quarter last year, Ikanos reported losses of $400,000, 24 cents per share, on revenues of $19.2 million.
Analysts were looking for GAAP losses of 10 cents per share and revenues of $39.5 million, according to Thomson Reuters -- so Ikanos beat the spread. What's so bad, then?
Ikanos disappointed with what's essentially a flat forecast for the September quarter. Ikanos is predicting revenues of $40 million to $43 million -- which is on par with what analysts had been expecting. But given that June-quarter revenues got a boost, investors apparently hoped the September forecast would be boosted as well.
Ikanos stood by its forecast. "Our Q3 guidance is similar to what the street was expecting to see," CFO Daniel Atler said on a conference call with analysts yesterday. "What you see is we just had a stronger Q2 than expected."
The boost in revenues came from Fusiv, the home-gateway chips Ikanos acquired from Analog Devices Inc. (NYSE: ADI). (See Ikanos Goes for the Gateway.) The downside is that Fusiv dragged margins down, to 45 percent non-GAAP versus a long-term goal of 47 to 50 percent, officials said.
Ikanos may take charges of $2 million to $2.5 million in its September quarter, related to acquisitions.
Separate from all this, Ikanos yesterday agreed to acquire Doradus Technologies Inc. , which sells a TV modulator and demodulator.
Ikanos CEO Rajesh Vashist said the acquisition, which was small enough that Ikanos doesn't have to report the price, gives the company some employees with digital signal processing (DSP) expertise and DSL experience, things that come in handy for Ikanos's current lines of chips. Ikanos also gets some new customers from the deal, but the actual Doradus revenues won't be material.
The technology is useful too, but only in the long term. "Eventually, as Ikanos grows into the triple play end-to-end delivery of video solutions, the digital TV part of it starts to become important. Now, that's somewhat further out in time, it's not imminent," Vashist said.
The story for Mindspeed, which sells VOIP chips, is more straightforward: The company is forecasting a decline in revenues for its fourth quarter, which ends in September.
For its third quarter, which ended June 30, Mindspeed reported losses of $4.5 million, 4 cents per share, on revenues of $35.9 million, compared with March-quarter losses of $7.1 million, 7 cents, on revenues of $34.6 million. (See Mindspeed Reports Q3.)
For its third quarter a year ago, Mindspeed reported losses of $9.5 million, 9 cents per share, on revenues of $27.7 million.
Mindspeed's figures met analyst expectations -- but analysts also expected to see September-quarter revenues climb to $38.2 million, according to Reuters Research. Instead, Mindspeed said revenues would drop by 5 to 10 percent -- falling between $32.3 million and $34.1 million.
The problem is that demand has been uneven. Certain chips were in short supply earlier in the year, so customers stocked up and have now slowed their ordering.
"We have a number of customers who, for a number of reasons including concerns about supply constraints, may have over-ordered a little bit," Mindspeed CEO Raouf Halim told analysts on yesterday's earnings call. "We also benefited in our third quarter from a catch-up with previously unsatisfied demand."
Halim said he expects the situation to "clear up" later in the year, but Mindspeed officials aren't giving any forecasts beyond September.
In part, Mindspeed's problems are a result of the VOIP market being so new. Mindspeed's revenue flow depends on service-provider deployments, which can be slow. "In some of these less mature markets where the deployments are still in their early phase, you would see some quarter-to-quarter fluctuations in the shape of our revenue curve," Halim said.
— Craig Matsumoto, Senior Editor, Light Reading