![Competitive Advantages
• “Diversification is important because it has allowed
[them] to ride out cycles in the industry better than
many of [Silicon Labs] peers, and it has given them
insight into a broader set of markets and
applications, fueling the new product ideas that
ultimately end up in our R&D pipeline.](https://image.slidesharecdn.com/presentationsilicon-13291707779831-phpapp01-120213161145-phpapp01/85/Silicon-Labs-SLAB-23-320.jpg)
Silicon Labs(SLAB)
- 1. Silicon Labs NASDAQ:SLAB Evan and Mitchell Lowery Robert Gwydir Brant ‘the real’ MacQuoid Tim Barnes
- 2. Silicon Laboratories • Incorporated 1996, now based in Austin, Texas • Design and develop analog-intensive, mixed-signal integrated circuits (ICs) for a range of applications • Mixed-signal ICs convert analog signals(sound & radio waves) into digital signals electronic products can process – Portable Devices – Satellite set top boxes – Amplitude/frequency modulation radios – Networking Equipment – Test & Measurement Equipment
- 3. Product Groups • Broad-based products – Microcontrollers – Timing products (clocks and oscillators) – Wireless receivers – Isolation devices – Human interface sensors • Broadcast products – Broadcast audio and video products • Access products – Embedded modems – Voice over IP (VoIP) products – Power over Ethernet devices • Mature products – Devices that are at the end of their respective life cycles • Receive minimal or no continued research and development investment – DSL analog front end ICs – IRDA devices
- 4. Basic Profile Market Cap 1.79 Billion Fiscal Year End January 1 Last Earnings October 26 Next Earnings January 26 Institutional Ownership 110.66% Insider Ownership 14.25% # of Analysts 16 S&P Quality Ranking
- 5. Competitors • Analog Devices, Inc. – designs, manufactures and markets analog, mixed- signal and digital signal processing integrated circuits – $10.57 Billion • Broadcom Corporation – Provider of semiconductors for wired and wireless communications – $17.66 Billion • Texas Instruments Incorporated – Designing and making of semiconductors – $34.34 Billion
- 6. Risk Factors • Unable to develop or acquire new and enhanced products that achieve market acceptance in a timely manner • R&D efforts are focused on a limited number of new technologies and products • Limited number of customers for a substantial portion of revenues – 10 customers: 36% of revenues • Significant litigation over intellectual property • Inventory risks and costs – Build products based on forecasts provided by customers before receiving purchase orders for the products • Products are complex and may contain errors which could lead to product liability • Customers require our products to undergo a lengthy and expensive qualification process without any assurance of product sales • Increased international activities significantly and plan to continue such efforts • Rely on third parties to manufacture, assemble and test products • Risks relating to product concentration • Most current manufacturers, assemblers, test service providers, distributors and customers are concentrated in the same geographic region • Semiconductor manufacturing process is highly complex and, from time to time, manufacturing yields may fall below expectations
- 7. Mergers and Acquisitions • Silicon Clocks – April 2010 for $21 million – Designed and developed microelectromechanical system (MEMS) technology to enable the manufacture of silicon resonators and sensors directly on standard CMOS wafers – Effort to leverage CMOS-based timing products into high- volume applications such as consumer electronics – Accelerate entry into the low end timing market while further scaling the Company’s engineering team • ChipSensors Ltd – October 2010 for $11.7 million – Created innovative single-chip CMOS sensors designed to detect temperature, humidity and gases
- 8. Mergers and Acquisitions • SpectraLinear Inc – January 2011 for $28.6m – Low-power, highly programmable and small- footprint silicon clocking solutions – Optimized for consumer electronics and embedded applications – Adds a broad family of timing ICs, accelerating penetration into high-volume applications
- 10. Management Discussion • Mixed-signal ICs are critical components in a broad range of applications in a variety of markets – communications, consumer, industrial, automotive, medical and power management • Third-party fabrication, assembly, packaging, testing and shipping – Faster delivery – Shorter production cycle – Lower inventory – Lower costs – Increased flexibility of test capacity
- 11. Management Discussion • Expertise in analog-intensive, high- performance, mixed-signal ICs – Enable highly differentiated solutions that address multiple markets • Through acquisitions and internal development, diversifying product portfolio – Next generation ICs with added functionality and further integration
- 12. Management Discussion Q3 • Sales cycle for ICs can be 12 months or more – 3-6 months more before customers ship significant volume of devices incorporating our ICs – Experience significant delay between incurring R&D and SG&A expenses and corresponding sales – If sales do not occur in quarter expected, expenses & inventory could be disproportionately high • Many ICs are designed for use in consumer products – Demand for our products subject to seasonality – Rapid change in our markets & across product areas make it difficult to accurately estimate impact of seasonal factors
- 13. Q3 Conference Call • TV tuner & demodulator shipments declined – TV makers working off inventory – Strong tier-one TV maker penetration – Introduced tuner to Tier-two TV makers in high volume emerging markets • FM tuner better seasonal lift than anticipated – Audio products continue strong design win activity
- 14. S-LABS • The company develops mixed-signal integrated circuits (ICs), which translate real- world analog signals (such as sound) into digital signals that can be processed by electronic products. Silicon Labs provides ICs used in set-top boxes, game consoles, portable electronics, industrial monitoring and control devices, and wireless handsets.
- 16. Power • “Top customers include Apple, Cisco, Huawei, Nokia, Pace, Samsung, Technicolor, and Varian Medical Systems. Most of Silicon Labs' sales come from customers outside the US.”
- 18. Industry Structure • “The company's 10 largest OEM customers account for 36% of sales”
- 20. Competitive Advantages • What sets them apart from other semiconductor markers? • The Sauce… “innovated mixed signal circuit design, there are very few companies that have the discipline and technical talent to create the mixed signal ICs they do.” • “Has both analog circuits and digital circuits on a single semiconductor die” http://files.shareholder.com/downloads/ABEA-39NRLI/1522740570x0x448278/CD564960- 9F11-464B-A6D9-0ABA6DF2C8E5/Silicon_Labs_2010_Annual_Report.pdf
- 21. Competitive Advantages • IP – They have “strategic blocks”, patents around patents • SLAB must continue to put money toward good researchers, but also continue to achieve good returns on R&D – Consistent R&D pipeline
- 22. Competitive Advantages • Forward looking, and good at it. • “The market for energy harvesting devices is poised to grow exponentially this decade. IDTechEx forecasts that more than ten billion energy harvesting devices will ship by 2019 – a 20x increase over the roughly 500 million units that shipped in 2009.” • “Silicon Labs has met this design challenge by creating a wireless energy harvesting system based on its Si10xx wireless microcontroller (MCU) family.” http://m2mworldnews.com/2011/05/25/56866-silicon-labs-powers-wireless-networking/
- 23. Competitive Advantages • “Diversification is important because it has allowed [them] to ride out cycles in the industry better than many of [Silicon Labs] peers, and it has given them insight into a broader set of markets and applications, fueling the new product ideas that ultimately end up in our R&D pipeline.
- 25. Bull Say… • “Silicon Labs has a talented R&D staff that has allowed the firm to develop innovative mixed- signal chips over time. • The company took the bold step of shedding its wireless business line, even though it was profitable, because the firm saw increased competition and lower profitability down the road. • Silicon Labs is not overly exposed to a single customer or end market.” http://subscriber.hoovers.com/H/company360/overview.html?companyId=59229 000000000
- 26. Summary • Strong, high value, high volume, customers – Require a lot from SLAB • Diversification to weather highs and lows better than competition • Industry Growth • Forward looking, and good at it • “Silicon Laboratories keeps cooking up new chips in its labs”
- 27. SLAB Income Statement FQ3 2011 FQ3 2010 FQ3 2009 FQ3 2008 FQ3 2007 FQ3 2011 FQ3 2010 FQ3 2009 FQ3 2008 FQ3 2007 10/1/2011 10/2/2010 10/3/2009 10/4/2008 9/29/2007 10/1/2011 10/2/2010 10/3/2009 10/4/2008 9/29/2007 Revenue 476.82 508.64 413.18 416.39 311.96 - Cost of Revenue 184.47 172.23 150.58 157.16 122.89 38.69% 33.86% 36.44% 37.74% 39.39% Gross Profit 292.36 336.41 262.60 259.23 189.07 61.31% 66.14% 63.56% 62.26% 60.61% - Operating Expenses 246.49 234.68 208.26 197.95 179.43 51.69% 46.14% 50.40% 47.54% 57.52% Operating Income 45.87 101.74 54.34 61.29 9.64 9.62% 20.00% 13.15% 14.72% 3.09% - Interest Expense 0.03 0.09 0.26 0.43 0.76 0.01% 0.02% 0.06% 0.10% 0.24% - Net Non-Operating Losses (Gains) (2.23) (0.81) 3.28 (4.92) (21.41) -0.47% -0.16% 0.79% -1.18% -6.86% Pretax Income 48.07 102.46 50.80 65.79 30.29 10.08% 20.14% 12.29% 15.80% 9.71% - Income Tax Expense 12.52 1.85 11.63 23.26 2.17 2.63% 0.36% 2.81% 5.59% 0.70% Income Before XO Items 35.55 100.61 39.16 42.53 28.12 7.46% 19.78% 9.48% 10.21% 9.01% - Extraordinary Loss Net of Tax 0.00 0.00 0.00 (5.40) (160.62) 0.00% 0.00% 0.00% -1.30% -51.49% Net Income 35.55 100.61 39.16 47.93 188.74 7.46% 19.78% 9.48% 11.51% 60.50%
- 28. SLAB Balance Sheet FQ3 2011 FQ3 2010 FQ3 2009 FQ3 2008 FQ3 2007 FQ3 2011 FQ3 2010 FQ3 2009 FQ3 2008 FQ3 2007 9/30/2011 9/30/2010 9/30/2009 9/30/2008 9/30/2007 10/1/2011 10/2/2010 10/3/2009 9/30/2008 9/30/2007 Assets + Cash & Near Cash Items 108.18 107.65 149.07 151.31 151.55 16.0% 15.2% 20.8% 22.9% 17.0% + Short-Term Investments 174.91 238.34 228.94 131.50 486.02 25.8% 33.6% 31.9% 19.9% 54.5% + Accounts & Notes Receivable 58.37 63.80 61.49 61.60 56.69 8.6% 9.0% 8.6% 9.3% 6.4% + Inventories 38.40 38.14 33.51 34.36 24.18 5.7% 5.4% 4.7% 5.2% 2.7% + Other Current Assets 46.90 40.28 25.31 17.45 33.79 6.9% 5.7% 3.5% 2.6% 3.8% Total Current Assets 426.77 488.21 498.31 396.22 752.24 63.0% 68.7% 69.4% 60.0% 84.3% + LT Investments & LT Receivables 17.84 19.31 25.34 53.37 0.00 2.6% 2.7% 3.5% 8.1% 0.0% + Net Fixed Assets 27.37 25.91 28.70 29.37 28.70 4.0% 3.6% 4.0% 4.4% 3.2% + Other Long-Term Assets 205.36 176.71 165.81 181.40 111.03 30.3% 24.9% 23.1% 27.5% 12.4% Total Long-Term Assets 250.58 221.93 219.85 264.13 139.73 37.0% 31.3% 30.6% 40.0% 15.7% Total Assets 677.35 710.14 718.16 660.36 891.97 100.0% 100.0% 100.0% 100.0% 100.0% Liabilities and Equity + Accounts Payable 25.72 26.84 26.84 32.41 35.23 3.8% 3.8% 3.7% 4.9% 3.9% + Short-Term Borrowings 0.00 0.00 0.00 0.00 0.00 0.0% 0.0% 0.0% 0.0% 0.0% + Other Short-Term Liabilities 61.02 61.24 62.14 57.24 43.56 9.0% 8.6% 8.7% 8.7% 4.9% Total Current Liabilities 86.74 88.08 88.98 89.65 78.79 12.8% 12.4% 12.4% 13.6% 8.8% + Long-Term Borrowings 0.00 0.00 0.00 0.00 0.00 0.0% 0.0% 0.0% 0.0% 0.0% + Other Long-Term Liabilities 19.28 21.66 50.51 45.54 44.68 2.8% 3.1% 7.0% 6.9% 5.0% Total Long-Term Liabilities 19.28 21.66 50.51 45.54 44.68 2.8% 3.1% 7.0% 6.9% 5.0% Total Liabilities 106.02 109.74 139.50 135.18 123.46 15.7% 15.5% 19.4% 20.5% 13.8% + Total Prefered Equity 0.00 0.00 0.00 0.00 0.00 0.0% 0.0% 0.0% 0.0% 0.0% + Minority Interest 0.00 0.00 0.00 0.00 0.00 0.0% 0.0% 0.0% 0.0% 0.0% + Share Capital & APIC 0.00 37.18 117.56 102.74 389.97 0.0% 5.2% 16.4% 15.6% 43.7% + Retained Earnings 571.32 563.22 461.10 422.43 378.54 84.3% 79.3% 64.2% 64.0% 42.4% Total Equity 571.32 600.40 578.66 525.17 768.51 84.3% 84.5% 80.6% 79.5% 86.2% Total Liabilities & Equity 677.35 710.14 718.16 660.36 891.97
- 29. SLAB Cash Flows FQ3 2011 FQ3 2010 FQ3 2009 FQ3 2008 FQ3 2007 FQ3 2011 FQ3 2010 FQ3 2009 FQ3 2008 FQ3 2007 10/1/2011 10/2/2010 10/3/2009 9/30/2008 9/30/2007 10/1/2011 10/2/2010 10/3/2009 9/30/2008 9/30/2007 Cash from Operating Activities + Net Income 35.55 100.61 39.16 47.93 188.74 + Depreciation & Amortization 23.78 18.98 20.52 17.06 16.27 66.9% 18.9% 52.4% 35.6% 8.6% + Other Non-Cash Adjustments 39.62 43.82 45.23 56.71 (121.25) 111.4% 43.6% 115.5% 118.3% -64.2% + Changes in Non-Cash Capital 1.07 (37.14) 11.84 8.65 (67.28) 3.0% -36.9% 30.2% 18.0% -35.6% Cash from Operations 100.02 126.27 116.75 130.35 16.49 281.4% 125.5% 298.1% 272.0% 8.7% Cash from Investing Activities + Disposal of Fixed Assets 0.09 0.00 0.00 14.27 271.21 0.3% 0.0% 0.0% 29.8% 143.7% + Capital Expenditures (7.47) (15.89) (11.66) (9.84) (8.21) -21.0% -15.8% -29.8% -20.5% -4.3% + Increase in Investments (178.06) (349.43) (182.04) (428.19) (444.64) -500.9% -347.3% -464.9% -893.4% -235.6% + Decrease in Investments 241.50 347.90 116.02 716.46 276.72 679.3% 345.8% 296.3% 1494.8% 146.6% + Other Investing Activities (46.19) (23.50) (12.20) (82.86) (17.61) -129.9% -23.4% -31.2% -172.9% -9.3% Cash from Investing Activities 9.86 (40.91) (89.88) 209.84 77.47 27.7% -40.7% -229.5% 437.8% 41.0% Cash from Financing Activities + Dividends Paid 0.00 0.00 0.00 0.00 0.00 0.0% 0.0% 0.0% 0.0% 0.0% + Change in Short-Term Borrowings 0.00 0.00 0.00 0.00 0.00 0.0% 0.0% 0.0% 0.0% 0.0% + Increase in Long-Term Borrowings 0.00 0.00 0.00 0.00 0.00 0.0% 0.0% 0.0% 0.0% 0.0% + Decrease in Long-Term Borrowings (7.17) 0.00 0.00 0.00 0.00 -20.2% 0.0% 0.0% 0.0% 0.0% + Increase in Capital Stocks 0.00 0.00 29.35 16.03 19.27 0.0% 0.0% 33.4% 10.2% 10.2% + Decrease in Capital Stocks (110.04) (150.85) (52.43) (356.76) (61.25) -309.5% -149.9% -744.3% -32.5% -32.5% + Other Financing Activities 0.00 5.05 (6.03) 0.30 14.83 0.0% 5.0% 0.6% 7.9% 7.9% Cash from Financing Activities (109.35) (126.78) (29.11) (340.44) (27.15) -307.6% -126.0% -710.3% -14.4% -14.4% Net Changes in Cash 0.53 (41.42) (2.24) (0.24) 66.81 1.5% -41.2% -0.5% 35.4% 35.4%
- 30. SLAB Enterprise Value 11/21/2011 10/1/2011 10/2/2010 10/3/2009 9/30/2008 9/30/2007 Market cap 1745.17 1403.28 1590.10 1965.74 11348.68 2302.19 + Preferred Equity 0.00 0.00 0.00 0.00 0.00 0.00 + Minority Interest 0.00 0.00 0.00 0.00 0.00 0.00 + Total Debt 0.00 0.00 0.00 0.00 0.00 0.00 - Cash & Cash Equiv 283.10 283.10 345.99 378.01 282.81 637.58 Enterprise Value 1462.08 1120.18 1244.10 1587.73 1065.87 1664.61
- 31. Liquidity Ratios Current Ratio Quick Ratio
- 32. Activity Ratios Asset Turnover A/R Turnover
- 33. Leverage Ratios Financial Leverage Debt/Equity
- 34. Profitability Ratios Gross Margin Operating Margin Profit Margin
- 35. ROA ROE ROC
- 36. Dupont Analysis
- 37. Silicon Labs- Piotroski Breakdown Qualification Score 1. Positive Net Income 1 2. Positive Cash Flow from Operations 1 3. Increase of Return of Assets 0 4. Cash Flow from Operations > Net Income 1 5. Decrease in Long-Term Debt to Assets 1(No Debt) 6. Increase in Current Ratio 1 7. Decrease in Shares Outstanding 1 8. Increase in Gross Margin 1 9. Increase in Asset Turnover 1 Total Score 8/9
- 38. Price/Book Ratio Price Multiples Price/Earnings Ratio Price/Sales Ratio Price/ Operating Cash Flow
- 39. Analyst Coverage
- 40. Earning Surprise - Quarterly
- 41. Earning Surprise - Annually
- 42. Earning Surprise - Matrix
- 44. Revenue Surprise - Matrix
- 45. Growth Rates Revenue Growth EPS Growth Asset Growth
- 46. Silicon does not pay a dividend
- 47. 6-Month Comparative vs. Peers
- 48. 2-Year Comparative vs. Peers
- 49. 5-Year Comparative vs. Peers
- 50. 6-month Comparative vs. Index
- 51. 2-Year Comparative vs. Index
- 52. 5-Year Comparative vs. Index
- 53. Questions?