Spreadtrum Second Quarter Results Top Estimates

(RTTNews) - Chinese chip maker Spreadtrum Communications, Inc. (SPRD), which is being acquired by China's Tsinghua Unigroup Ltd., reported Tuesday a profit for the second quarter that surged 66 percent from last year, reflecting improved gross margins and strong double-digit revenue growth. Both adjusted earnings per share and quarterly revenues topped analysts' expectations.

Spreadtrum agreed in mid-July to be acquired by Tsinghua Unigroup for $31.00 per ADS or $10.33 per ordinary share, in a deal that values Spreadtrum's equity at about $1.78 billion on a fully diluted basis.

"In the second quarter we saw very strong demand for entry-level smartphones based on our single-core smartphone chipsets. We expect this trend to continue well into 2014 as wireless subscribers replace feature phones with their first smartphone," Chairman and CEO Leo Li said in a statement.

Li added that, "In the second quarter, we increased our market share in midrange handsets as well, having achieved volume shipments of our dual-core smartphone chipsets to both China and global handset makers."

The Shanghai, China-based fabless semiconductor company reported net income of $34.83 million or $0.64 per ADS for the second quarter, higher than $20.95 million or $0.41 per ADS in the prior-year quarter.

Excluding share-based compensation expenses, adjusted net income for the quarter was $51.8 million or $0.95 per ADS, compared to $29.6 million or $0.58 per ADS in the year-ago quarter.

On average, eight analysts polled by Thomson Reuters expected the company to report earnings of $0.72 per share for the quarter. Analysts' estimates typically exclude special items.

Total revenue for the quarter surged 60.5 percent to a record $277.81 million from $173.13 million in the same quarter last year, and topped eight Wall Street analysts' consensus estimate of $274.07 million by a whisker.

The company noted that it achieved record quarterly revenue as a result of strong demand for entry level smartphones in China and emerging markets.

In the second quarter, smartphone products accounted for 75 percent of chipset revenue, and feature phone, modem and other products accounted for the other 25 percent. The company's operating margin for the quarter contracted 60 basis points to 12.9 percent from last year's 13.5 percent, primarily due to higher research and development expenses as a percentage of revenue, partially offset by a 70 basis points improvement in gross margin.

Meanwhile, adjusted operating margin improved 50 basis points to 19.0 percent from last year.

Total operating expenses for the quarter were $69.18 million, up 69.8 percent from $40.75 million in the prior-year quarter.

SPRD closed Tuesday's regular trading session at $29.80, down $0.11 or 0.37% on a volume of 2.38 million shares. However, the stock was up $0.15 or 0.50% in after-hours trading.