Shares of Spreadtrum Communications, Inc. (SPRD) plunged 9% in extending trade on Thursday after fabless semiconductor company reported a profit for the third quarter that missed analysts' expectations, while quarterly revenues topped their estimates.
However, profit declined 41 percent from last year, as revenue growth was more than offset significantly lower margins. The company also provided revenue outlook for the fourth quarter, in line with Street view.
The company noted that the strong ramp in smartphone products this quarter helped drive an improvement in gross margin, and projects continuing improvement in product mix as smartphones scale in large volume in 2013.
Separately, the company revealed that Samsung has selected Spreadtrum Baseband for GPRS feature phones, with Samsung E1282 and E1263 Trios to ship with Spreadtrum's 40nm 2.5G baseband SC6530 to global consumers.
Spreadtrum also supplies Samsung with basebands supporting China's 3G TD-SCDMA standard for its flagship smartphones, Samsung GALAXY S III, Samsung GALAXY Note and the recently launched GALAXY Note II.
"This quarter, we exceeded our revenue guidance as a result of very strong demand for our TD-SCDMA and EDGE smartphone chipsets. Our smartphone products are fueling the growth of a new ultra-low cost retail segment in China and in overseas markets, making smartphones more affordable and attractive to the first time smartphone buyer," Chairman and CEO Leo Li said in a statement.
The Shanghai, China-based company reported net income of $23.24 million or $0.44 per ADS for the third quarter, lower than $39.27 million or $0.75 per ADS in the prior-year quarter.
On average, six analysts polled by Thomson Reuters expected the company to report earnings of $0.48 per share for the third quarter. Analysts' estimates typically exclude special items.
Excluding share-based compensation expenses, adjusted net income for the quarter was $29.3 million or $0.56 per ADS from $43.53 million or $0.83 per ADS in the year-ago quarter.
Total revenue for the quarter grew 1.7 percent to $187.87 million from $184.78 million in the same quarter last year, and topped six Wall Street analysts' consensus estimate of $182.93 million.
In the third quarter, smartphone products accounted for 37 percent of chipset revenues, and feature phone and other products accounted for 63 percent of chipset revenues.
Operating margin for the quarter contracted 800 basis points to 13.4 percent from last year's 21.4 percent, as gross margin declined 450 basis points and higher operating expenses as a percentage of revenue.
Looking ahead to the fourth quarter, Spreadtrum said it expects revenues in a range of $189 million to $196 million, citing strong ramp in smartphone products. Street is currently looking for quarterly revenues of $189.88 million.
"This quarter we are expanding our product portfolio to include WCDMA chipsets, dual-core smartphone chipsets, and integrated connectivity which will help drive further growth in 2013," Li added.
SPRD closed Thursday's regular trading session at $21.33, up $0.07 or 0.33% on a volume of 2.36 million shares. However, the stock plunged $1.83 or 8.58% in after-hours trading.
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