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Avago report boosts Cirrus Logic's stock

The Associated Press

Cirrus Logic Inc.'s shares jumped Wednesday after another chip maker's report suggested improved demand in the mobile market.

THE SPARK: Avago Technologies Ltd. reported a better-than-expected fiscal third quarter and gave a solid revenue forecast for its current quarter late Tuesday. The company also said that it expects its revenue for the fourth quarter will jump by 12 to 15 percent over the prior year.

The market believes this is due in part to Apple and Samsung preparing for new platforms.

THE BIG PICTURE: Cirrus Logic produces audio chips that are used in Apple Inc.'s iPod and iPad.

In July, the company reported that its net income and revenue both improved for the period, but its sales fell short of Wall Street's expectations. The company had previously warned investors that sales of a particular chip had slowed down because one of its customers was switching to a newer component.

While the company did not name the customer, it is widely believed to be Apple. The latest report from Avago, which also supplies to Apple, suggests that demand may pick up soon. The company is expected to reveal the latest version of the iPhone in September or October.

THE ANALYSIS: Sterne Agee analysts Andrew Huang and John Shen said that Avago's guidance increases their conviction that a new product ramp is happening at Cirrus Logic's biggest customer. The analysts expect a low-end iPhone and new Motorola phone should help results.

SHARE ACTION: Cirrus shares jumped $1.92, or 9.4 percent, to close at $22.42 Wednesday. Even with the day's gains, it remains in the lower half of its 52-week trading range of $16.46 to $45.49.