Synaptics Q3 revenue outlook weak, shares fall

BANGALORE, INDIA: Touchscreen technology maker Synaptics Inc forecast a sequentially weak third quarter, showing that it has been losing its grip on the handset market, sending its shares down as much as 12 percent.

The company, which posted a quarterly profit that beat Wall Street expectations, expects third-quarter earnings to be down sequentially to 39 cents to 45 cents a share, excluding items, on revenue of $110 million to $115 million.

Analysts on average were expecting adjusted earnings of 45 cents a share, on revenue of $119.6 million, according to Thomson Reuters I/B/E/S.

"They seem to be getting some significant competition from Cypress Semiconductor Corp and Atmel Corp," said ThinkEquity analyst Vijay Rakesh. He said the company was losing share in the handset market.

The company is guiding down revenue about 18 percent sequentially even in a significant touch handset upcycle, Rakesh added.

Cypress has started supplying to LG Electronics and Nokia, which were initially using Synaptics' touch solutions, the analyst said.

For the second quarter ending Dec. 31, net income fell to $12.2 million, or 35 cents per share, from $17.6 million, or 50 cents per share, a year earlier.

Excluding items, it posted earnings of 62 cents a share.

Revenue fell 6 percent to $133.3 million.

Analysts expected earnings of 56 cents a share, excluding exceptional items, on revenue of $131.3 million.

In the second quarter, revenue from the non-PC business -- which includes products for handsets and MP3 players -- rose 33 percent sequentially but fell 17 percent from the year-ago period. This segment now accounts for close to 45 percent of the company's revenue.

"The touch handset market is growing very fast, and they are only growing 33 percent, which is nothing," said Rakesh, who is expecting the market to grow more than 100 percent in next two to three years.

Synaptics also expects fiscal 2010 revenue to be in the range of $495 million to $505 million, compared with analyst expectations of $502.6 million.

Synaptics' recently shipped mobile designs include Google's Nexus One, HTC Droid Eris offered by Verizon, and the Samsung H1, the company said on a conference call with analysts.

The Santa Clara, California-based company's shares, which have gained 25 percent of their value in last three months, were down about 12 percent at $26.65 in trading after the bell. They closed at $30.35 Thursday on Nasdaq