Cirrus Shares Soar As Company Shifts Chip Focus To Consumer Electronics News from E-InSite Despite a sell-off of chip stocks on the Nasdaq today, shares inCirrus Logic Inc. soared 22 percent today following the company's revelation onWednesday that it would be shifting its focus to producing chips for consumer audio andentertainment applications.
Shares in Austin-based Cirrus (nasdaq: CRUS) closed today at $20.32, up $3.62.
Cirrus said it would move away from magnetic storage products and instead focus onanalog and DSP products for consumer electronics.
“As we evaluate the current economic environment, the fab over-capacity situation,the growth of the consumer and electronics markets and our best prospects for profitablegrowth, we believe it is in the best interest of all our shareholders to move toward thehigher growth and higher margin entertainment electronics business,” said DavidFrench, president and chief executive officer of Cirrus, in a statement. “By refiningour focus, Cirrus Logic will be the semiconductor industry's largest pure play inconsumer entertainment electronics, with exceptional strength in analog and DSPtechnologies.”
Cirrus said it believes the shift in its business model will increase its profitabilityrates over the next two years. Provided there is recovery in the semiconductor industry byearly next year, the company expects to see a growth in sales of 14 percent and anincrease of 20 percent in operating profits.
The company's new direction was announced in conjunction with its financialresults for the fourth fiscal quarter and fiscal 2001, ended March 31. Pro forma netincome for the fourth quarter was $4.6 million, a significant decline from $22.4 millionin the prior quarter, but above the $3.7 million reported in the year ago quarter. Resultswere in line with analyst expectations, according to Reuters.
Revenues fell to $199.7 million in the quarter, compared to $208 million in the priorquarter. Revenues did increase 25 percent against $160.2 million in the fourth fiscalquarter 2000.
The company said that strong sales in its magnetic storage division were offset bylower-than-expected revenues in analog and Internet products, primarily due to inventorycorrections in the PC marketplace. The company said it expects the shift in its businessfocus to result in a 20 percent decline for its magnetic storage revenues next quarter,with continued decline further into fiscal 2002. Despite this, Cirrus will not completelyabandon magnetic storage.
“We will continue to support ongoing magnetic storage customers; in fact, weexpect to continue to see strong revenue from these customers, including Fujitsu, over thenext few quarters,” French said.
The company said it expects first fiscal quarter revenues to be 10 percent to 15percent lower than the fourth fiscal quarter, due to its magnetic storage products, andthat it anticipates its higher-margin analog and Internet businesses to grow slightly inthe forthcoming quarter. Annual growth of 40 percent is expected in this area during theSeptember quarter, Cirrus said.
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