Mindspeed Technologies (NASDAQ: MSPD) reported better-than-expected earnings for its fiscal first quarter on Monday. It’s strong numbers like these that show why MSPD was my top stock for 2011, and prove it’s one of the best tech sector investments you can make right now.
The market was expecting earnings per share (EPS) of 6 cents, but Mindspeed handily beat the Street, posting earnings of 9 cents per share. The company met its revenue expectations, booking $40.5 million in sales for the quarter, a 9.5% rise compared with last year’s numbers.
And looking ahead, management said that it expects sales in the second quarter to come in between $36.9 million-$39.1 million, within the range that analysts currently are expecting.
That’s great news for the company and fantastic news for its shareholders! MSPD has come a long way since its $0.01 per share loss (on a GAAP basis), in last year’s first quarter, reflecting a much better business environment—and an even more promising one in the days ahead.
In its conference call, management said that patent sales helped the company turn the corner, coming in at $2.5 million vs. $0 in last year’s quarter. They added that this backlog is strong and growing, as a result of customers depleting their inventories and increasing their orders.
Mindspeed is transitioning its strategy from WAN (wide-area network) to the significantly expanding CCPP (communications convergence processing products) and HPA (high?performance analog products) markets, as the focus on 3G and 4G wireless networks continues to strengthen.
For the quarter, MSPD reduced its revenues from WAN products to 20% of its total revenue base, while growing its contributions from CCPP and HPA by 19% and 20%, respectively, year-over-year.
Geographically, the company is seeing revenue gains from Asia, particularly, China, heating up. China now accounts for some 32% of MSPD’s sales, with all of Asia about 66% of the pie, followed by 25% from the Americas and 9% from Europe. This makes a lot of sense, since the biggest part of global growth in technology is going to come from the tremendous potential in China’s economy.
Investors have begun to once again notice Mindspeed, with call activity rising significantly in the last couple of weeks. Additionally, the company is receiving more analyst exposure with a new buy recommendation from Merriman.
As the chart above shows, the company’s shares are getting close to a break-out past its 50-day and 200-day moving averages. Other technical indicators including MACD and Fibonaccis imply a bullish outlook for the next few months.
The Semiconductor Industry Association (SIA) estimates that semiconductor sales rose 32.8% in 2010, and anticipate significant double-digit annual growth through 2012.
The SIA also estimates that China and India will continue to be the major forces in driving the growth of communications infrastructure spending, and that bodes very well for MSPD. I continue to look forward to some very good numbers from the company this year.
Check out the other FREE stock picks that make up InvestorPlace.com’s 10 Best Stocks for 2011.
Nancy Zambell is editor of Buried Treasures Under $10. As of this writing, she was recommending MSPD to her paid newsletter subscribers.
