Skyworks Shares Climb Higher Following Avago Earnings Beat

Skyworks Solutions Inc. SWKS shares moved higher in after-market trading following impressive fourth-quarter fiscal 2015 results by fellow chipmaker Avago Technologies Limited AVGO.

Avago's bottom line surpassed analyst expectations, as it logged outstanding year-over-year growth in earnings as well as the top line.

For the reported quarter, non-GAAP earnings for the company came in at $2.51 per share, up from $1.99 per share in the year-ago period. Also, revenues climbed 15.7% year over year to $1,840 million.

Avago is spearheading the chip industry's consolidation wave, as it moves forward with its proposed acquisition of rival wireless chipmaker Broadcom Corp. BRCM. The $37 billion deal would merge two companies with complementary sales of communications chips, including processors that handle diverse chores in smartphones from Apple Inc. AAPL and Samsung Electronics Co. Ltd.

Avago, which counts Apple as one of its largest customers, cited robust growth in its wireless-chip division, which helped push revenues for fiscal 2015 to a record high. Fellow Apple chip supplier Skyworks also moved higher on the positive report, as strengthening demand for mobile-phone components will boost its operational performance as well.

Also, Apple is Skyworks' largest customer — accounting for roughly 34% of Skyworks' revenue. And Skyworks has been rapidly gaining market share in the iPhone segment. In fact, as smartphones get more and more complicated, manufacturers will increasingly look to semiconductor makers who are equipped to supply entire integrated mobile systems, like Skyworks.

Skyworks also stands to benefit from mobile data consumption, which is exploding. Thus, apart from being an Apple supplier, increasing smartphone complexity and mobile data consumption are two more factors that will drive sales for Skyworks in the coming times.

Skyworks and Avago both presently carry a Zacks Rank #3 (Hold). 

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