Analysis
Skyworks' First Guide With Qorvo Sent It Down 16%
Skyworks guided its first quarter as a combined company with Qorvo to revenue of $1.80 billion to $1.90 billion, below the $1.99 billion expected. The shares fell about 16% after hours.
Skyworks Solutions closed its last quarter as a standalone company with a small beat and opened its first as a combined one with a warning. Revenue for the fiscal fourth quarter, which ended on October 2, was $1.046 billion, above the $1.035 billion midpoint of its own guidance, and adjusted earnings were $1.28 a share; on a reported basis the company earned 15 cents. The combination with Qorvo was completed after the quarter ended, and chief executive Phil Brace opened the release with "Today marks a new chapter for Skyworks."
The chapter starts lower than analysts expected. For the December quarter, the first that includes Qorvo, Skyworks forecast revenue of $1.80 billion to $1.90 billion and adjusted earnings of about $1.25 a share at the midpoint, against LSEG consensus of $1.99 billion and $1.50, according to CNBC. The stock fell about 16% after hours, on a day when the Philadelphia Semiconductor Index had risen 2.6%.
The company gave the base for comparison itself. Added together, the two businesses had revenue of about $1.98 billion in the September quarter, $1.046 billion at Skyworks and $937 million at Qorvo, but Qorvo's figure included an extra week worth about $70 million. On a like-for-like basis of about $1.91 billion, the guidance midpoint of $1.85 billion implies a decline of roughly 3% in a quarter that usually benefits from the holiday smartphone build. Skyworks also said this is the last quarter in which it will report the split between the two legacy businesses, which makes future comparisons harder to check from outside.
The stock's reaction reflects two concerns rather than one. The first is the handset market that both companies depend on, where radio-frequency chips are sold into each new phone; Apple, a large customer of both, guided its own December quarter on Monday to revenue growth of 7% to 10% with lower margins as memory costs rise. The second is the merger arithmetic: a combined company is valued on the cost savings and growth promised when the deal was announced, and a first guide below the sum of the parts makes investors question both.
Skyworks is now a test of how quickly a large chip merger shows its benefits. The share price will probably track the company's next steps on integration, such as cost-saving targets and the margin outlook, more than the December quarter itself. Until those numbers arrive, the after-hours drop is the market's estimate of how long the wait will be.