Skyworks has barely finished celebrating its Qorvo merger before warning investors that its newly enlarged semiconductor business faces a quarterly sales decline.
The company expects revenue between $1.8 billion and $1.9 billion for the December quarter, its first reporting period following the combination. That compares with approximately $1.98 billion generated by the two businesses during their respective September quarters, hardly the triumphant beginning management might have preferred.
At the midpoint of its forecast, revenue would fall approximately seven per cent sequentially, although the comparison includes an additional week of trading in Qorvo’s previous quarter. Removing that distortion leaves a decline of about three per cent, which remains an unhelpful direction for a company promising investors a glorious new future.
Skyworks reported standalone fourth-quarter revenue of $1.046 billion, with GAAP diluted earnings per share of just $0.15. Its preferred non-GAAP accounting produced a far more attractive figure of $1.28 per share, once again demonstrating the benefits of asking investors to ignore certain expenses.
For the full fiscal year, Skyworks generated revenue of $3.96 billion, and GAAP diluted earnings per share of $1.14. Qorvo contributed approximately $937 million in its September quarter, bringing the two companies’ combined revenue to $1.983 billion, although that figure does not represent the results of a fully integrated business.
Skyworks chief executive and president Phil Brace said: “Today marks a new chapter for Skyworks.” He argued that combining the companies would provide the scale and technological capabilities needed to compete across smartphones, automotive electronics, defence and communications infrastructure.
The combination, completed on 5 October, creates a major supplier of radio-frequency components, power management technology and mixed-signal semiconductors. Its portfolio includes RF front-end components for smartphones, gallium nitride devices, precision timing products and technologies supporting next-generation wireless networks.
Unfortunately, the smartphone business appears determined to spoil the celebrations. Skyworks expects smartphone revenue to decline by a low-teens percentage sequentially, citing seasonal factors, continuing weakness in the Android market and the additional week included in Qorvo’s previous reporting period.
The company is hoping its diversified markets will provide some relief. These businesses, which include defence, automotive and data centre infrastructure, are expected to account for more than 40 per cent of combined sales, with revenue forecast to increase by a low-single-digit percentage sequentially despite the shorter comparison period.
Management has been particularly enthusiastic about the enormous savings it expects from combining the businesses. Skyworks is targeting at least $500 million in annual cost reductions within 24 to 36 months, although achieving those savings will require the usual corporate integration exercise in which two organisations discover how many departments they can manage without.
Chief financial officer and senior vice president Philip Carter expects approximately $150 million in operating expense savings during fiscal 2027, weighted towards the second half. The company hopes to exit that year with an annualised savings rate of $250 million to $300 million, leaving considerable work before reaching its eventual target.
The merger has brought some financial benefits. Moody’s upgraded Skyworks to investment-grade Baa3 following the transaction, while Fitch revised its outlook from negative to stable. However, the acquisition financing adds costs, with approximately $50 million in other expenses, primarily interest, expected in the December quarter.
Skyworks forecasts non-GAAP diluted earnings per share of approximately $1.25 for its first combined quarter. It is promising a stronger position in wireless technology as 5G-Advanced and 6G increase component complexity, but investors will have to see whether the promised efficiencies can compensate for a smartphone market that is already making life difficult for the newly married semiconductor giant.
