Omnivision Technologies (NASDAQ:OVTI) develops and markets high performance semiconductor image sensor devices. Its key product Camerachip is an image sensor that is used in a number of consumer and commercial mass market applications. In 2009, Omnivision shipped 335M image sensors, which declined from 425M image sensors in fiscal 2008. In fiscal year 2009, sales outside of the US represented 93.3% of total revenue. Most of the revenue comes from APAC and a very small portion from Europe. The company was making losses till the second quarter of 2009 and has been profitable since the third quarter of 2009.The latest earning results surprised the market and consequently the stock has appreciated by 16%.
The company presented its earning quarter ending on 30th April 2010 on 27th May 2010. Revenue for the fourth quarter of fiscal year 2010 was $157.2M, which was 76.4% higher than its revenue in the same period last year. Gross margins improved sequentially to 24.9% for the fourth quarter from 24.6% in the third quarter. The revenue segregation is as given below:
Notebooks & PC
Emerging Market Product
Overall its financial position is strong. It has total cash standing at $334M, current ratio at 4.51 and manageable debt obligations of $47M.Some of the key takeaways are as given below:
1. Acquistion of Aurora System: This acquisition will help Omnivision have better resolution, low cost structure and low power consumption in its products. However, this is a long term investment which will yield a good return over a three to five year of time period.
2. Improvement in Average Selling Price of Shipped Unit: The average selling price improved from $1.18 to $1.26. Management refrained from giving any indications where this improvement is sustainable. However, it has won a number of socket designs wins and has a good position in 5-megapixel and 8-megapixel, which carries higher ASP. This will help Omnivision to improve its product mix, and consequently further improvement in average selling price
3. Excellent Supply Chain Management System: When a firm has to ship over 100M products in every quarter, it is important to have a good supply chain system in place. In the past, Omnivision has clearly demonstrated it and is now well positioned to meet any rapid increase in end customer demand for imaging devices.
4. New Technology Which Is Liked by End Customers: The launch of OmniBSI-2, a second generation backside illumination pixel architecture, extends its leadership in the pixel technology space. The second innovative technology is the Camera tube, which is used as secondary camera application in mobile handsets. It has introduced a total of four products in the last quarter. Management expects significant volume from this product in the coming quarter.
5. Improved Margins: The gross margins sequentially improved to 24.9% from 24.6%.The gross margin improved due to a better product mix and higher average selling prices, although the overall volume was less than in prior quarters and thus revenue growth remained more or less flat.
Omnivision expects to perform well, owing to proven technology products, a good product mix and long term clientele which should help in meeting its revenue guidance. Management expects that next quarter revenue will be in the range of $190M-$210M, which represents 21% to 34% increase from its current revenue number. This revenue should result in diluted EPS from $.17 to $.3.
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