Inphi revises business outlook
Although Inphi’s iMB products are qualified and ready for volume production, the company has concluded that due to industry events outside of its control, material production volume of these iMB products for LRDIMM for the next generation of server computing platforms will likely slip into next year.Inphi continues to believe that market demand and associated revenue growth related to the new LRDIMM and RDIMM products will be generated in 2012 along with the roll-out of customers’ introduction of next-generation computing platforms.Although the shift in volume shipments is disappointing, Inphi believes its products are strategically well positioned for future growth. In the meantime, the timing and success of Inphi’s component-based products will continue to be dependent on the schedules and successes of end-customer platforms utilizing these products.Separately, the company has also decided to discontinue the sale of some acquired legacy products in Taiwan. The restructuring expense associated with achieving the ongoing cost savings will be reflected in this quarter’s GAAP financial statements. At this time, the company is in the process of transitioning the site to be a design-only center.Part of the transition will include an evaluation of the identifiable tangible assets (approximately $0.3 million at June 30, 2011) and the intangible assets (approximately $1.4 million at June 30, 2011) as well as goodwill (approximately $5.9 million at June 30, 2011) that might ultimately be abandoned in the process of converting the Taiwan site into a design-only center. The analysis required to complete the evaluation of these assets is expected to take approximately 30 to 60 days.As a result of these conditions, Inphi is withdrawing its previous business outlook for the third quarter and prior expectations for sequential improvement in the fourth quarter as provided on July 26, 2011. The company is revising its outlook for the third quarter of 2011 as follows:Revised Business OutlookThe following statements are based on current expectations for the third quarter of 2011.- Revenue is expected to be in a range of $16 million to $18 million for the third quarter of 2011. At this time, Inphi is withdrawing its prior outlook for the fourth quarter and no longer expects significant sequential Q4 revenue growth. Future revenues are expected to grow once next-generation server platforms are shipping in production volumes. The company’s outlook also assumes that the economy does not continue to deteriorate and that sales of older generation of platforms contract modestly based on currently expected customer ordering patterns in anticipation of shipments of the new platform.- GAAP gross margin and non-GAAP gross margin are still expected to be in the range of 65% to 66%.- Stock-based compensation expense is expected to be in the range of $2.1 million to $2.3 million.- Non-GAAP net income, excluding stock-based compensation expense, is expected to be between $0.0 million and $0.8 million, or $0.00-$0.03 per diluted common share, on approximately 29.6 million diluted weighted average common shares.- The primary difference between non-GAAP and GAAP net income are expected to be restructuring expenses associated with Inphi’s discontinuation of acquired legacy products in Taiwan; these expenses have not been fully quantified as of yet.