management will have a hard time explaining why gross margins actually are going to come down even more
despite close to $100 mln in additional revenues next quarter. At least there should be some economies of scale working in their favour. But obviously they had to lower product prices even further to get the additional Apple orders for next quarter.
Company is of course still looking cheap and great sales are not bad either but management in fact is a hostage of Apple so be prepared to get out when Apple starts to make mistakes.
- Apple revenue concentration became much greater and will climb even higher going forward
- multiple production issues and Apple pricing pressure eating into margins, margins to stay depressed going forward
- LED product ramps delayed
- other audio business remains depressed
the devil is in the details here - the company is becoming 100% dependent on Apple, margins are coming down despite higher revenues, rest of the business in dismal shape
Stock is looking cheap currently but the huge dependence on Apple demands a BIG discount - so I would look for a short here as the stock doesn't go up despite a beat and raise quarter.
If I were Apple, I'd offer CRUS 35% gross margins -- take it or leave it. When a customer counts on you for 85% of its sales, it doesn't have much leverage. I'm really surprised Apple is letting CRUS grow earnings so dramatically. Hostage is definitely the proper word to describe CRUS's position in the relationship.