Earnings Preview: Synaptics

Synaptics (SYNA) is expected to report Q1 earnings after the market close on Thursday, October 22 with a conference call scheduled for 5 pm ET.

Guidance

The consensus estimate is 42c for EPS and $116.47M for revenue, according to First Call. Management provided Q1 guidance on their last earnings call that was below consensus then, calling for Q1 revenue of $113M-$119M, and FY10 revenue of $495M-$525M.

Analyst Views

Thomas Weisel says, with Intel (INTC) reporting that PC growth continues to be driven by portable computers, they expect Synaptic's core PC business to remain healthy, accounting for roughly 50% of total sales. Weisel expects non-PC sales, including handsets, to meet their 5% quarter-over-quarter growth estimate. The firm is estimating Q1 revenue of $116M, up 1% q/q, and non-GAAP EPS of 40c. While Weisel believes current share prices likely reflect expectations for a revenue guidance miss, it remains comfortable with a 20% q/q growth estimate. Based on Intel’s revenue guidance, and continued strength in portable computers, Weisel expect Synaptic's PC business could grow 5-10% q/q, with non-PC revenue potentially growing by more than 20% q/q based on designs ramping in multimedia products and handsets.

The December quarter has historically been the strongest quarter for handset and multimedia revenue, but could post slightly weaker growth this year. Thomas Weisel's revenue and non-GAAP EPS estimates are $139M, up 20% q/q, and 58c respectively. Consensus is $139.71M and 60c. On Oct. 13 Synaptic shares took a dive as Jefferies downgraded the shares to underperform from hold, citing increasing competition in handsets and a shift to lower-priced products in the PC market. Jefferies said it looks as if orders for the current quarter are below what the maker of touchscreen technology for computers and smart phones is expecting. The analyst said his research suggests that the company's business has deteriorated further since his last downgrade in late July.