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Follow up on Cirrus Logic Conversation with Managment

We had an opportunity to speak to management today.  I’m not going to recap our entire conversation due to confidentiality reasons but these are my impressions.

The rest of the year is pretty much coming in as expected.  No big upside surprises nor downside disappointments.

The real question is about whether Cirrus chips are in the upcoming Apple iPhone 5.   My bet is that’s a secret held close to the belt and NO imminent announcement is coming out.

Cirrus is hiring a lot of engineers mostly to meet anticipated product demand, not for quality and control issues.

The Company has been buying stock back and thinks their stock is a good value.

The Director Smith who bought 142,000 shares earlier this year at $21.06 most likely thought Cirrus was a good long-term buy.  I asked for his phone number but was refused it.  Is there some requirement that Directors of a company be available to the public shareholders?  At any rate Mr. Smith, ex CFO of Novellus, I’d love to hear from you about the merits of your investment in Cirrus Logic. My shareholders have lost money on it although nowhere near as much as you have.

There’s a tablet design win that has not been announced.  I expect that could move the stock briefly.

The NOL’s could possibly be used by some acquiring company depending on a lot of complex requirements.

CRUS would acquire a company to relieve their dependence on Apple if they found the right fit.  They just have a bad history of acquisitions so they will be very gun-shy.

The next big market for CRUS is LED lighting and that could be years away.

There is nothing in their arrangements with Apple to prevent them from doing business with Apple’s competitors.  Problem is CRUS doesn’t want to invest a lot of engineering time and money on the come.  They don’t feel there is a clear-cut volume high value relationship besides Apple in the mobile computing space when it comes to analog sound chips.   Unfortunately I think they will have to make that investment if they want to diminish their reliance on one customer.  (Apple is nearly 50% of their business.)

The Company has a solid balance sheet (no debt), strong intellectual property, buying back stock.  In the words of management,” we wouldn’t be doing that if we weren’t confident”.  I interpret that to mean they feel they are in the iPhone 5.  All in all CRUS is going to be a frustrating investment.  The Company will continue to rightly have a PE penalty for reliance on a single customer.  This is the kind of stock that does nothing for months, pays no dividend, has no catalyst to go up and just when you sell it, you wake up the next morning to find out that Texas Instruments or someone else has bought them out for twice the price you sold it at.

 

 

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