Atheros Slides Despite Solid Q2 Report

As I noted in an earnings round-up, wi-fi chip specialist Atheros (ATHR) reported solid earnings for the second quarter; nonetheless, the stock was swooning after hours, although I’m not entirely sure why.

Here’s what I know. On the post-announcement conference call, Atheros said revenue for the third quarter will be up 4%-6% sequentially, or somewhere between a little under $105 million and a little under $107 million, with pro forma EPS of 25-26 cents a share. That is about in line with the Street consensus of $107 million and 25 cents.

The company said gross margins in the third quarter will be 47.5% to 48.5%; that will be down a bit from the higher-than-expected 49.7% in the second quarter.

In an interview with Tech Trader Daily Monday afternoon, Atheros CEO Craig Barratt noted that the company had its ninth consecutive quarter of record revenue. He said the company’s largest businesses were strong, with rapid growth in the 802.11n wifi chip business, with an increasing percentage of PCs shipping with 802.11n capability, and strengthening demand for its new ethernet chip business. The one soft spot in the quarter, he says, was for chips for the PAS wireless networking standard, a cellular phone protocol used only in China.

He said a primary customer in the PAS market has seen some reduction in market share, with more weakness likely in the third quarter; but he also noted that the PAS business is well under 5% of revenue. He notes that 802.11n was 24% of its wifi business in revenue, up from 18% in the first quarter.

I’m sure there is some good explanation for the slide in the stock Monday afternoon…but I don’t happen to know what it is. And Barratt says he doesn’t, either. Anyone else have a guess?

After hours, Atheros was down $2.26, or 7%, at $29.85.

ATHR 1-yr chart: