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No. of Recommendations: 17
I decided to pick Skyworks Solutions for the free choice since I recently invested into it after reading from Saul's board. Deciding to pick for free choice is like trying to pick a movie to watch in Netflix, a tedious one at least for me, keep browsing through the movie list and pick one randomly after getting tired browsing :). Once I picked SWKS I was seesawing whether I must continue with it especially because it is so well followed in Saul's board and by Neil itself. Anyhow, here is another amateur report.


Skyworks Solutions Inc (NASDAQ:SWKS)


Business Overview:-
Skyworks Solutions, Inc., is an innovator of high performance analog and mixed signal semiconductors linking people, places and things across a rapidly expanding number of new and previously unimagined applications including automotive, broadband, wireless infrastructure, energy management, GPS, industrial, medical, military, networking, smartphones and tablets.

Key Customers
Arris, Bose, Cisco, Dell, Ericsson, Foxconn, Fujitsu, General Electric, Google, Honeywell, HTC, Huawei, Landis & Gyr, Lenovo, LG Electronics, Microsoft, Nest, Netgear, Northrop Grumman, Rockwell Collins, Samsung, Sonos, and ZTE.

Competitors
Analog Devices, Avago Technologies, Linear Technology, Maxim Integrated Products, Murata Manufacturing, QUALCOMM, RF Micro Devices and Triquint Semiconductor.

Acquisitions & Joint Venture
In Aug 2014, they entered into a joint venture with Panasonic Corporation for the design, manufacture and sale of Panasonic's surface acoustic wave ("SAW") and temperature-compensated SAW filter products. They own a controlling 66% interest in the joint venture and have the option to acquire the remaining 34% within two years.

In Jan 2012, they acquired Advanced Analogic Technologies Inc. and accelerated their entry into vertical markets with highly complementary analog semiconductor product lines. In June 2011 they acquired SiGe Semiconductor, Inc. and expanded their RF front-end solutions to facilitate wireless multimedia across a wide range of new applications

Chariman and CEO - David J.Aldrich
Headquarters - Woburn, MA
Founded - 1962 (Changed corporate name from Alpha Industries to Skyworks Solutions, Inc on June 25, 2002)
Employees - 5,550


Financial Overview:- (Courtesy Google Finance)

SWKS Price Avg Daily Vol 52-Week High EPS 1-Mo Return 6-Mo Return
$88.07 5,036,750 $112.88 $3.82 -1.01% -5.16%

Outstanding Shares Mkt Cap(Millions) 52-Week Low Beta 3-Mo Return 1-Y Return
187,164,415 $16,483.57 $44.06 $1.48 -16.08% 57.24%


Aug 5, 2015 Quarterly Report - Highlights
* Net revenue increased by 38% and 51% to $810 million and $2,378 million for the three and nine months ended July 3, 2015, respectively, as compared to the corresponding periods in the prior fiscal year. This increase in revenue was primarily related to our continued growth as smartphones displace traditional cellular phones, increased strength in emerging markets due to the adoption of 3G and 4G technologies, increases in tablet computing, and the expansion of our analog product portfolio to address additional content within the handset and tablet markets as well as new vertical markets including medical, automotive, military and industrial.

* Operating margin increased by approximately 660 and 720 basis points to approximately 32% and 31% for the three and nine months ended July 3, 2015, respectively, as compared to the corresponding periods in the prior fiscal year. This increase in operating margin was primarily related to higher revenue and the leveraging impact on our gross margin and operating expenses partially offset by higher employee compensation expense.

* As a result of the aforementioned factors, overall diluted earnings per share increased by 83% and 99% for the three and nine months ended July 3, 2015, respectively, as compared to the corresponding periods in the prior fiscal year.

* Board of Directors declared a $0.26 per share cash dividend to be paid in our fourth fiscal quarter, a 100% increase from the prior cash dividend of $0.13 per share.

* Their ending cash and cash equivalents balance increased approximately 37% to $1,106 million as of July 3, 2015, from $806 million as of October 3, 2014.

Risk Factors (From Annual Report)
* We operate in the highly cyclical semiconductor industry, which is subject to significant downturns.
* The wireless communications and analog semiconductor markets are characterized by significant competition which may cause pricing pressures, decreased gross margins and rapid loss of market share and may materially and adversely affect our business, financial condition and results of operations.
* If Original Equipment Manufacturers, or OEMs, and Original Design Manufacturers, or ODMs, of communications electronics products do not design our products into their equipment, we will have difficulty selling those products. Moreover, a "design win" from a customer does not guarantee future sales to that customer.

Financial Information:- (Courtesy 1ypeg.com)

SWKS
Price: $88.07 1YPEG: 0.24 Adjusted P/E: 18


Adjusted Earnings - Historical Stats
+---------------------------------------------------------------------------------+
| Fiscal Q. Adj. EPS TTM EPS YoY TTM Growth Growth Acceleration |
+---------------------------------------------------------------------------------+
| Q3 2015 $1.34 $4.87 76.4% -0.1% |
| Q2 2015 $1.15 $4.36 76.5% 18.8% |
| Q1 2015 $1.26 $3.83 64.4% 38.2% |
| Q4 2014 $1.12 $3.24 46.6% 48.4% |
| Q3 2014 $0.83 $2.76 31.4% 37.1% |
| Q2 2014 $0.62 $2.47 22.9% |
| Q1 2014 $0.67 $2.33 |
| Q4 2013 $0.64 $2.21 |
| Q3 2013 $0.54 $2.10 |
| Q2 2013 $0.48 $2.01 |
| Q1 2013 $0.55 |
| Q4 2012 $0.53 |
| Q3 2012 $0.45 |
+---------------------------------------------------------------------------------+


Revenue - Historical Stats
+---------------------------------------------------------------------------------+
| Fiscal Q. Revenue TTM Revenue YoY TTM Growth Growth Acceleration |
+---------------------------------------------------------------------------------+
| Q3 2015 $810M $3.10B 51.0% -0.6% |
| Q2 2015 $762M $2.87B 51.3% 26.4% |
| Q1 2015 $806M $2.59B 40.6% 46.0% |
| Q4 2014 $718M $2.29B 27.8% 53.6% |
| Q3 2014 $587M $2.05B 18.1% 46.0% |
| Q2 2014 $481M $1.90B 12.4% |
| Q1 2014 $505M $1.84B |
| Q4 2013 $477M $1.79B |
| Q3 2013 $436M $1.74B |
| Q2 2013 $425M $1.69B |
| Q1 2013 $454M |
| Q4 2012 $421M |
| Q3 2012 $389M |
+---------------------------------------------------------------------------------+


Earnings Surprise (Courtesy Thomsan Rueters)
In last 6 quarters the surprise %'s are as follows +4.3%, +2.0%, +5.9%, +4.1%, +3.5% & +5.1%

Earnings Estimate (Courtesy Thomsan Rueters I/B/E/S Estimates)
EPS 2015E $5.26
EPS 2016E $6.20
EPS 2017E $7.07

Glassdoor Review:-
Approve of CEO - 90%
Recommend to a friend - 72%

Conclusion:-
Skyworks Solutions, Inc has been experiencing outstanding growth for the past few years in both Revenue and Earnings. They have out performed than most of their competitors in the recent years. They have impressive list of customers. Over next several years they have a potential to grow rapidly in India, China and other emerging markets due to increase in customer base transitioning to more advanced cellular handsets like 3G/4G/LTE etc. The expected annual growth for next five years is around 26%. The 1Yr PEG is at favorable 0.24.

At the end of the day semiconductor business is highly cyclical in nature so the demand for their products can go weak on global economic slowdown. Competition is intense in this area, time to market is very important and the business needs to keep up with the changing design technology through R&D which could be expensive. Qualcomm & Avago Technologies are much bigger in size and they are also competing in the RF space for a bigger pie. That is something we need to watch for.

Overall it is impressive what Skyworks has achieved so far and all of the rapidly expanding number of new and previously unimagined applications must help grow their business briskly. I am also impressed with the glassdoor review and they are consistent in beating the earning estimates.

My hypothetical real-money portfolio rating: 4 stars (out of 5 possible).
My CAPS call: Green Thumb (outperforms the market over 5+ years)


-nagana
Long SWKS
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