OIIM: Continued TV Panel Shortages Challenge Sequential Improvement

By Lisa Thompson


O2Micro (NASDAQ:OIIM) reported Q3 2017 revenues of $15.5 million slightly higher than expected and up 7% from last year. Guidance for revenue for the fourth quarter is sequentially flat, plus or minus five percent which, at the midpoint is down year over year. The company continues to be hurt by the shortage in panels for high-end TVs and fingerprint recognition IC chips constraining customer’s production. While this quarter was on target, the revenue shortfall expected for Q4 is exacerbated by an increase in operating expenses both sequentially and year over year. The company had expected much better revenues in Q3 and Q4 and ramped spending on R&D, which has increased operating losses. This spending was not wasted but has resulted in more design wins that should contribute to better revenues in 2018. We are cutting revenue and earnings estimates accordingly as orders refuse to rebound. 

At September 30, 2017, the company had $46.2 million in cash and equivalents (or $1.80 per ADS.) The company burned $810,000 in cash in the quarter. The company expects to be cash flow breakeven in the second half of next year, but not for the full year.

Business Units 

Intelligent lighting continued to be affected by the shortage of large panels for some of its customers in Q3, and the shortage is expected to continue into Q4. 

Computers continue to suffer with the decline in notebooks, but smartphones are taking up the slack as customers roll out production volumes of product. The company expects this segment to grow in 2018 after years of decline

Battery management is the company’s second largest sector and fastest growing. It continues its excellent growth as the industry increases it use of lithium ion batteries. While there are now Bluetooth connected tool batteries that work with an app, the industry is moving to more highly sophisticated Internet of Things applications. New generations of tools will allow OIIM to sell higher end product at higher cost to this market as its chips do more for customers.


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