Maxim Integrated Products (MXIM) had some accounting issues these last couple of years that have now been cleaned up, so it is a good time to take a close look at this leading analog semiconductor chip maker.
Revenues held steady in Q3. At $501.2 million, they were flat sequentially from $501.3 million and down 4% from $524.1 million year-earlier.
Guidance for Q4, based on what management saw in October, is to revenues of $410 to $440 million, which would be quite a slump.
Fortunately Maxim has good profit margins, which should leave it profitable even if revenue erosion is that bad. In Q3 GAAP net income was $67.6 million, or $0.21 per share. Non-GAAP EPS was $0.35. Cash flow from operations was an astonishing $157.1 million.
How can Maxim be so profitable in the highly competitive semiconductor market? They keep on top of markets where they have a competitive advantage and abandon markets where they don't. They are in diverse end markets: by percent of full revenues: 28% computer, 28% consumer, 24% industrial, and 20% communications. Within these markets they focus on areas like power management and integration of multiple functions on a single chip.
Also in contrast to many chip technology companies, Maxim pays a hefty dividend, $0.80 per year per share at present. This allows you to have some of your profits without having to sell stock, which is nice in this undervalued, illiquid market.
For a fuller report on Maxim's results, see my Summary of Maxim (MXIM) Q3 Analyst Conference.
Keep in mind that while Maxim is pretty solid, all investments involve risks, so ...