George Soros’ Soros Fund Management buys a stake in Spansion

Market Realist

Must-know: Soros Fund Management's positions in 1Q 2014 (Part 5 of 9)

(Continued from Part 4)

Soros Fund Management and Spansion

Soros Fund Management added new positions in Baker Hughes Inc. (BHI), RF Micro Devices Inc. (RFMD), Devon Energy (DVN), Spansion Inc. (CODE), and Marathon Petroleum (MPC) in 1Q14. The top positions it sold include J.P. Morgan Chase & Co. (JPM), Citigroup (C), and J.C. Penney (JCP).

George Soros’ Soros Fund Management added a new position in Spansion Inc. (CODE) that accounts for 0.49% of the fund’s 1Q 2014 portfolio.

Spansion designs, manufactures, and develops embedded systems semiconductors, which include flash memory, microcontroller, mixed-signal, and analog products and embedded system-on-chip solutions. The company focuses on the transportation, industrial, consumer, communications, and gaming markets.

Spansion, which is most known for its NOR products, is expanding its portfolio in the areas of NAND flash memory, microcontroller, mixed-signal, and analog products, as well as programmable system solutions or embedded system-on-chip solutions to broaden its customer engagement and bring differentiated products to embedded markets. To further this strategy, Spansion acquired the microcontroller and analog business (the MCA business) of Fujitsu Semiconductor Limited (FSL) in August of last year for $150 million. In fiscal 2013, Spansion had net sales of $971.7 million and net loss of $78.3 million.

Spansion, which is shifting from being a flash memory specialist to becoming an embedded systems supplier, reported first quarter 2014 GAAP net sales of $311.8 million, gross margin of 28.8%, operating loss of $9.4 million, and net loss of $22.5 million or $0.38 per share. Net sales increased due to the inclusion of $141.2 million of revenues from the Fujitsu MCA business. It saw a $31.4 million decrease in flash memory sales. The decline in embedded sales was mainly due to lower consumer and gaming revenues and a downward pressure on selling prices.

Management noted in its earnings release that Spansion saw “increased revenue of 64% year-on-year and record design wins across all segments in the first quarter of 2014,” adding that its “results demonstrate increased demand for the microcontroller and analog products we acquired last year.”

Spansion expects demand to increase for its stand-alone Flash memory, microcontrollers, and analog products as well as growing interest in system-on-chip solutions that integrate its Flash memory directly into microcontrollers. For the second quarter of 2014, Spansion estimates net sales in the range of $315 million to $340 million and GAAP diluted net loss per share of -$0.16 to -$0.09. Non-GAAP gross margin is expected to be in the range of 32% to 35%, and non-GAAP diluted EPS are expected to be in the range of $0.21 to $0.27.

The company strengthened its automotive flash memory portfolio last month by introducing six automotive-grade devices. In addition to automotive applications, automotive-grade flash memories are ideal in the industrial space for solar inverters, power switches, factory automation, and safety monitoring devices.

Spansion’s competitors include Analog Devices (ADI), Freescale Semiconductor (FSL), Infineon Technologies, Intel Corporation (INTC), Macronix International (MXICY), and Micron Technology (MU). Spansion filed last month for patent infringement complaints against Macronix.

Continue to Part 6

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