What is Cypress Semiconductor Corporation (NASDAQ: CY)?
First of all, I am sorry for publishing an article about Cypress Semiconductor Corporation (NYSE: CY) without giving the company adequate time to respond.
However, I recently wrote about the declining stock price of Cypress Semiconductor Corporation (NASDAQ: CY) and my prediction that the stock would continue to decline for two years. As of the writing of this article Cypress Semiconductor Corporation’s stock is down nearly 50% from my forecast.
Second, I wrote a lot about Cypress Semiconductor Corporation (NASDAQ: CY) and its programmable SoC business, UltraCMOS family, which makes the USB, USB 3.1 and Thunderbolt 2 computer interface/connectors for the automotive, wearable, industrial, smart home, networking and mobile internet infrastructure (IoT) market.
I am not interested in marketing. I want to get to the bottom of this problem.
Cypress Semiconductor Corporation has a larger business than all of the programmable semiconductor companies – including UltraCMOS – put together. For example, Cypress Semiconductor Corporation has over $2 billion in annual revenue and is responsible for producing the USB 3.1 interface in every laptop sold globally, as well as the Thunderbolt 2 interface in every laptop sold worldwide. And, Cypress Semiconductor Corporation has a $1 billion legacy custom programmable microcontroller business making a wide range of analog and power management ICs, as well as other small products. It also has a whole lot of patent portfolio, which makes it a rather unique company. In short, if Cypress Semiconductor Corporation is ever to recover from this decline and regain its former status as the top American programmable semiconductor company, it will need the support of the automative, industrial, IoT, smart home, networking and mobile internet services industry. Until this is done, the programmable semiconductor industry as a whole will be in trouble.
Trouble is, Cypress Semiconductor Corporation is suffering from a problem that does not concern itself, but seems to have completely forgotten about. A certain number of customers are dropping Cypress Semiconductor Corporation equipment in favor of alternatives that were not being supplied by Cypress Semiconductor Corporation. They are also dropping out of long-term term business relationships with Cypress Semiconductor Corporation.
The end result is that Cypress Semiconductor Corporation will be competing against itself if it does not come up with a plan to reverse this trend. This problem is not affecting only its programmable semiconductor business. This problem is also affecting its core custom microcontroller business, which has a declining revenue that is well above our estimate.
I am not the only one who is dissatisfied with Cypress Semiconductor Corporation’s leadership. The share price has declined 45% in just six months.
And that is also not an isolated incident. For the past twelve months, Cypress Semiconductor Corporation has failed to predict or forecast a turnaround in its declining revenue. The reality is this, Cypress Semiconductor Corporation is putting its $2 billion per year business into danger because it is focusing too much of its efforts on getting into new markets and at the expense of its traditional businesses.
Prior to getting into this industry, Cypress Semiconductor Corporation should have invested heavily in its existing business with the expectation that its legacy business would grow. Now, Cypress Semiconductor Corporation has decided to invest all of its resources in new markets that simply don’t have enough revenue to move the company forward.