SAN JOSE -- Cypress Semiconductor Corp. here today (April 10) became one of the first major chip makers to warn that its first-quarter revenues came in lower than previously downgraded estimates. Cypress said its Q1 sales were $262 million in the quarter, ended April 1, compared to a previous estimate of $280 million.
"The first quarter ended worse than we expected," said T.J. Rodgers, chief executive officer of Cypress. "We barely turned positive on bookings with cancellations offsetting virtually every order we received. It is not clear if our customers reduced the inventory positions they were trying to manage, considering that end demand has really slowed down.
"We still don't have the visibility, but judging from what we've seen in Q1, we are estimating that the second quarter will be another down quarter in the $200-210 million range with single digit EBG earnings before goodwill," Rodgers said, referring to an estimated earnings per share figure.
Cypress' warning of lower-than-expected revenues in the first quarter is what Wall Street has been worrying about, according to analysts, who have recently cut their own forecasts for earnings at major chip companies. Many financial analysts worry that market conditions are still getting worse for chip suppliers.
A new forecast for Q2 and the rest of the year will be issued by Cypress on April 19, when the company releases its first quarter results.
A month ago, Cypress had downgraded its first-quarter estimates after announcing significant changes to a major purchasing agreement and its IC-distributor model in Asia and Europe (see March 5 story). The business model resulted in a one-time revenue decline of $25 million in the first quarter, according to Cypress.
The changes included the conversion of a high-volume strategic account to a consignment program ($4 million) and the change in Cypress' European and Asian distribution sales model ($21 million). Excluding those changes, Cypress said its Q1 revenue would have been $287 million, a 22% decline from $370 million in the fourth quarter but a 9% increase from $264 million in the first quarter last year.
Including the changes in its business model and distribution arrangements, Cypress said Q1 revenues totaled $262 million. The San Jose company estimated that the lower Q1 revenues resulted in earnings per share before goodwill (EBG) in the $0.23-to-0.26 range vs. a estimate of $0.30-to-0.34.
