Adding to the regular iPhone lineup would be a rumored “iPhone 5C,” or a cheaper version of the device. And throw in the upcoming iPads (both the regular one and the mini), which used five Fairchild chips last year. So there is no doubt that the company’s Apple Inc. (NASDAQ:AAPL) account is going strong. However, the massive gap between guidance and the estimate for the ongoing quarter suggests that Samsung’s production cuts played a very big role.
So, the mobile segment, which had brought in 27% of revenue a couple of quarters back, is under pressure and might not bounce back as Samsung’s next Galaxy flagship is some time away.
Not all is bad
However, a look at the other important segments of the company — industrial and automotive — will make it clear that all is not lost. The company is seeing robust demand in industrial and appliance end markets as they grew 15% on a sequential basis from the previous quarter. Demand was strong across all industrial end-markets and the company expects the good times to continue.
Similarly, the automotive end-market has been on a roll and it achieved record revenue. The segment is expected to perform well in the ongoing quarter as well. This is expected since Fairchild’s power module solutions for electronic power steering will be fitted into a bunch of vehicles as auto sales remain strong in the U.S.
Final words
Thus, it looks like weakness from one customer has forced Fairchild to tread cautiously and issue conservative guidance. Did Fairchild low-ball its guidance? We’ll get the answer to that question in the next quarter, but it should be taken into account that the industrial and automotive business, accounting for around three-fifths of the company’s revenue, are doing well.
All in all, it can be summed up that two of its businesses are running well while the third is in neutral. But, if strength returns to mobile, which might happen if Samsung’s strategy of flooding the market succeeds, then all of Fairchild’s businesses would be running at full speed. So if you are invested in Fairchild and thinking about what to do with the shares, then being patient might be the correct course of action.
The article An Underperforming Stock That You Shouldn’t Sell originally appeared on Fool.com and is written by Harsh Chauhan.
Harsh Chauhan has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Harsh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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