SiRF Q1: revenue of $62.0M, net loss $28.1M

SiRF Q1:  revenue of $62.0M, net loss $28.1M
SiRF Technology Holdings announced yesterday its financial results for the first quarter. Net revenue was $62.0 million, a decrease of 7.9 percent from $67.3 million reported in the first quarter of 2007. Gross margin in the first quarter of 2008 was 42.6 percent, as compared to 53.9 percent in the first quarter of 2007. Net loss for the first quarter of 2008 was $28.1 million.

“This was a difficult quarter for SiRF. The economic uncertainties and continuing weakness in consumer demand noted in our February 4 conference call and March 25 press release, and increased market competition, resulted in significant challenges for SiRF and many of its customers, and reduced revenue and gross margins,” said Diosdado Banatao, Executive Chairman and Interim President and CEO.

Demand weakness?

SiRF continues to pretend a large part of its difficulties is due to a weak demand for consumer GPS products. But here we need to distinguish two things: sell-in of PNDs to the channels and sell-out from these retailers to consumers. Actually, the first quarter has seen a weakness in sell-in, not in sell out. TomTom this week announced rather bad results for its first quarter because of sell-in problems (European channels reduced their inventories to improve their balance sheets). But TomTom still expects 40% growth in Europe and 100% growth in the United States for the PND market in 2008, an overall 50% growth for the category.

The mobile phone market is obviously growing less steadily (14.3% increase in the first quarter against one year ago according to IDC figures released this week), but the number of GPS-enabled phones is really surging which should also benefit to SiRF.

SiRF current difficulties are rather due to a slower than expected ramping up of its sales in the wireless space as well as an aggressive competition in the PND space. In the personal navigation segment three factors are explaining these problems. First SiRF is losing market share within the product mix of the tier one players - mainly Garmin and TomTom - the announcement of STMicro’s Cartesio chipset win in the Garmin 205 PND is a clear example of that. Second, the tier two players - where SiRF continues to have a very strong market share - have seen an increased seasonality: their first and second quarter sales are pretty weak because - due to market concentration - they essentially target volume deals for the holiday season. Third, these dynamics are accentuated by a shift within SiRF’s own product mix from high value SiRF StarIII chipset to lower value SoC products (coming from the Centrality acquisition). The sales mix of PND vendors is turning to 75%-80% entry level products and 20% to 25% high-end products, so inevitably does SiRF’s sales mix.

Friday, April 25th 2008

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