In my previous article, I had raised concerns that, despite my belief that the fears of Apple (NASDAQ:AAPL) socket losses on the part of Cirrus (NASDAQ:CRUS) were probably overdone, the loss of both the iPad Air and the iPad Mini audio amplifier sockets was likely to spook investors and sow the seeds of doubt. However, some new information has come to light that clears up a significant amount of the doubt. While Apple did indeed go with a Maxim (NASDAQ:MXIM) class D amplifier in the iPad Air, it appears that Cirrus kept the iPad Mini Retina socket, which serves to invalidate the recent sell-off based on the iPad Air socket loss news.
iFixit did a teardown of the new iPad Mini with Retina Display, and revealed the following,
While the iPad Air featured four Maxim Class D audio amplifiers from Maxim (they were small and hard to find), the iPad Mini with Retina display very clearly shows a pair of larger, Apple-branded audio amplifiers. This highly suggests that Cirrus - not Maxim - has this socket.
Jeffries Was Wrong
In a note published by Cirrus bear, Jeffries, the firm noted that Apple "probably lost the iPad Mini with Retina" and made the bold claim that Cirrus was likely to eventually lose all of the Apple audio amplifier business. Well, it seems that these fears were highly overblown as only the iPad Air features the Maxim part. While I had originally assumed that the Maxim part may have been used for cost/size reasons, it is interesting to see the (possibly) lower margin/lower ASP iPad Mini come with the larger Cirrus chips.
Further, it's interesting to note that while the iPad Air is likely to serve to - in some capacity - rejuvenate Apple's 9.7" iPad sales, the iPad Mini is likely to far outsell the iPad Air as the secular trend towards smaller tablets is pretty well understood (and the iPad Mini offers no compromises over the iPad Air - it's just a screen size variant).
At this point, it is much more likely that Cirrus wins back the 9.7" iPad audio amplifier socket in the next product cycle than it is for the company to lose every one of its Apple sockets. The fears are indeed overdone.
I am buying shares
With the stock near 52-week lows, and with the biggest weapon that the bears had to keep the stock down largely defused, I have taken the opportunity to purchase an initial batch of shares with additional capital ready to be deployed into more shares. While the shares may go lower, I believe that the risk/reward in light of this news (and in light of the company's dirt-cheap valuation and healthy exposure to Apple) now favors a long position. This is a volatile stock, make no mistake, but it is also a compelling one for investors looking to bet against what appears to be a very flawed bear thesis.
Disclosure: I am long CRUS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I may add to my position at any time.