ON Semiconductor Introduces New Components For Communication Systems (ONNN)

The manufacturer of semiconductor components, ON Semiconductor (NASDAQ: ONNN), stated that it has introduced a range of new components to address Peripheral Component Interconnect Express (PCIe) applications in communications systems. The company’s share price, which fell to a yearly low yesterday, opened with a positive gap and stayed in the positive territory for the rest of the day.

The Arizona-based supplier of high performance silicon solutions for energy efficient electronics has experienced some rough weather for the past 12 months with a negative net earnings and a debt-to-equity ratio (0.71) higher than its peers. The price of semiconductor components such as NAND and DRAM had a free fall in the year 2011, but started recovering quickly when manufacturers announced cuts in capex and production increase plans. ON Semiconductor’s share price quickly recovered from a low of $7.00 in the month of November 2011 to $9.50 in the month of February 2012.

On April 3, 2012, the semiconductor industry association in Washington reported a decline in the global semiconductor sales, from $24.7 billion in the month of February to $22.9 billion in the corresponding period last year due to sluggishness in Europe. The report deflated ON Semiconductor’s share price to $6.50 by the end of May 3, 2012.

On June 5, the semiconductor industry association stated a decline in global semiconductor sales for the month of April 2012 compared to corresponding period of 2011. However, the report also pointed out that the semiconductor industry is emerging from the slump. Following the news, the company’s share price briefly recovered to $7.20 in the next few days. A month later, the semiconductor industry association reported a drop in the global semiconductor sales for the month of May 2012 as well. With a report of continuous decline in global semiconductor sales, ON Semiconductor’s share price made a new 52-week low of $6.20 in the month of July 2012.

On July 30, 2012, the company introduced a bus transceiver IC that is compliant with the FlexRay communications protocol. Two days later, ON Semiconductor announced a $300 million share repurchase program along with unimpressive second-quarter 2012 results that saw an 80% decline in net income to $6.9 million.

The global semiconductor sales for the month of June 2012, reported on August 2, 2012, indicated a 2% drop compared to corresponding period last year. Two weeks later, ON Semiconductor announced 250 job cuts and the cancellation of senior executive bonuses. The share price touched a low of $6.23 in the month of August 2012.

On September 5, 2012, the company announced the completion of a privately negotiated exchange for $100 million of its 2.6% Convertible Senior Subordinated Notes due 2026.

Reduction of total debt obligations by approximately 26%, or $100 million, resulted in the rebound of share prices to $7.00 by mid-September. However, the report of a 3.2% slump in global semiconductor sales for the month of August 2012 pulled the share price back to a new 52-week low on October 10.

Today, the company introduced new components such as differential clock and data fanout buffers, 4-channel and 6-channel differential switches, and transient voltage suppressors. These components will address Peripheral Component Interconnect Express (PCIe) applications in communications systems such as routers, servers, networking equipment and ATE.

David Somo, Vice President of Corporate Marketing at ON Semiconductor, commented that, “As a member of the Peripheral Component Interconnect Special Interest Group (PCI-SIG), ON Semiconductor continues to expand its portfolio of products to support the advanced interfaces required by networking and communications customers.”

Considering the low valuations, the news triggered a rally at the counter. ON Semiconductor ended the day at $5.95 per share, up $0.08 or 1.4% on a volume of 5.2 million shares.

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Published by Steve Hackney

Steve Hackney is a corporate finance professional with over 14 years of experience in cash management and investing. He earned a Bachelor of Science in Finance from Florida State University and holds a Certified Treasury Professional certification. Steve lives in Orlando, Florida with his family.