Stock Preacher

ON Semiconductor Corp. (NASDAQ: ONNN)

ON Semiconductor Corp. (ONNN) is a global supplier of power, analog, digital signal processing, mixed signal, advanced logic, data management semiconductors, memory and standard component devices. It designs, manufactures and markets semiconductor components that address the design needs of electronic systems and products. The Company operates through five segments: automotive and power regulation, computing, digital and consumer, standard products and custom and foundry product group.

The Company’s power management semiconductor components controls, converts, protects and monitors the supply of power to the different elements within a range of electronic devices.

Its Automotive and Power Regulation segment offers amplifiers, comparators, voltage regulators and references; AC-DC/DC-DC converters; ignition insulated gate bipolar transistors; and high voltage MOS field effect transistors used in power conditioning and switching applications.

The Company’s Computing Products segment provides controllers and power MOSFETs for power management in VCORE, DDR and chipsets.

Its Digital and Consumer Products segment offers products for digital portable devices in four application areas, such as system power management with FETs and DC-DC converters; EMI and RF filtering; audio and video signal distribution with analog switches and op amps; and LED lighting solutions for LCD screens and camera flash.

The Company’s Standard Products segment provides standard diode and transistor products, over-voltage protection products, standard logic products, and high frequency products for consumer electronics, computing, wireless communications, industrial electronics and networking markets. Its Custom And Foundry Product Group segment engages in the design and manufacture of customer-specific and standard semiconductor products for the automotive, medical, industrial, communications, military and aerospace markets. These products fall into the logic, analog and discrete categories used by the World Semiconductor Trade Statistics (WSTS) group. On March 17, 2008, the Company completed the acquisition of AMIS Holdings Inc. On October 10, 2008, the Company acquired Catalyst Semiconductor Inc.

The Company was founded in 1999 and is headquartered in Phoenix, Arizona.

Source:https://trading.scottrade.com/quotesresearch/ScottradeResearch.aspx?symbol=ONNN, http://www.reuters.com/finance/stocks/incomeStatement?stmtType=INC&perType=INT&symbol=ONNN.O , http://www.onsemi.com/PowerSolutions/content.do?id=1116

Financial Summary

ONNN has recognized efficiencies from implemented restructuring activities and continues to implement profitability enhancement programs to improve its cost structure; however, the United States and global economy are currently undergoing a period of slowdown and unprecedented volatility, and the future economic environment may continue to be less favorable for the foreseeable future. In addition, the semiconductor industry has traditionally been highly cyclical and has often experienced significant downturns in connection with, or in anticipation of, declines in general economic conditions. These macroeconomic factors have affected the Company’s customers and suppliers, which in turn have affected its business, including sales, the collection of receivables, and results of operations. ONNN’s automotive customers have been experiencing downturns in their business due in large part to macroeconomic factors beyond their control and have commenced reorganization proceedings under Chapter 11 of the U.S. Federal Bankruptcy Code.

ONNN’s ability to collect receivables from these customers is dependent upon the resolution of the reorganization proceedings. The total amount of automotive customers represent approximately 16% of ONNN’s total revenues for the quarter and six months ended July 3, 2009. Indeed, although the Company view many of these macroeconomic environment issues as temporary, its continuing outlook for the future of the automotive industry, in light of the indicators highlighted by the present environment, will ultimately affect its future emphasis on marketing to this industry, its future research and developments efforts into new product lines and its segments in general.

Revenues were $419.8 million and $562.7 million during the quarters ended July 3, 2009, and June 27, 2008, respectively. The decrease from the second quarter of 2008 to the second quarter of 2009 was primarily due to the drop in product volume and mix of 22% and reduction in average selling prices of 5%, partially offset by an increase in revenues from the acquisition of Catalyst of $13.0 million or 2%.

ONNN’s gross profit was $138.2 million in the second quarter of 2009 compared to $191.6 million in the second quarter of 2008. As a percentage of revenues, gross profit was 32.9% in the second quarter of 2009 as compared to 34.1% in the second quarter of 2008. Gross profit as a percentage of revenue decreased during the second quarter of 2009 as compared to the second quarter of 2008 primarily due to a decrease in prices and capacity utilization in the second quarter of 2009 compared to the second quarter of 2008. Average selling prices declines of 5% were partially offset by cost reduction activities and a lower amount of fair market value step up in inventory (approximately a 2% impact on gross margin percentage).

Research and development expenses were $50.7 million in the second quarter of 2009 compared to $67.5 million in the second quarter of 2008, representing a decrease of $16.8 million, or 24.9%. Research and development expenses represented 12.1% and 12.0% of revenues in the second quarter of 2009 and the second quarter of 2008, respectively. The decrease in research and development expenses was primarily attributed to a decrease in employee wages and salaries as a result of mandatory time off and other cost-savings plans including headcount reductions in response to the continued dramatic economic decline, partially offset by increased stock compensation expense.

Selling and marketing expenses were $28.4 million in the second quarter of 2009 compared to $37.9 million in the second quarter of 2008, representing a decrease of $9.5 million, or 25.1%. Selling and marketing expenses represented 6.8% and 6.7% of revenues in the second quarter of 2009 and the second quarter of 2008, respectively. The decrease in selling and marketing expense was primarily attributed to a reduction in sales commission expenses due to the decrease in revenue combined with a decrease in employee wages and salaries as a result of the reductions in headcount, partially offset by increased stock compensation expense.

General and administrative expenses were $30.0 million in the second quarter of 2009 compared to $31.9 million in the second quarter of 2008, representing a decrease of $1.9 million, or 6.0%. General and administrative expenses represented 7.1% and 5.7% of revenues in the second quarter of 2009 and the second quarter of 2008, respectively. The decrease in general and administrative expense was primarily attributed to a decrease in employee wages and salaries as a result of mandatory time off and reductions in headcount, partially offset by increased stock compensation expense.

ONNN’s gross profit was $250.3 million in the first six months of 2009 compared to $338.2 million in the first six months of 2008. As a percentage of revenues, gross profit was 31.3% in the first six months of 2009 as compared to 34.3% in the first six months of 2008. Gross profit as a percentage of revenue decreased during the first six months of 2009 as compared to the first six months of 2008 primarily due to decreases in prices and capacity utilization in the first six months of 2009 compared to the first six months of 2008. Average selling price declines of 6% were partially offset by cost reduction activities and a lower amount of fair market value step up in inventory in the first six months of 2009 as compared to the first six months of 2008 (approximately a 2% impact on gross margin percentage).

Source: http://www.onsemi.com/PowerSolutions/content.do?id=1128

Analyst Consensus

This is the consensus forecast amongst 23 polled investment analysts. Against the ON Semiconductor Corp company.

The 19 analysts offering 12 month price targets for ONNN have a median target of 10.00, with a high estimate of 14.00 and a low estimate of 7.00. The median estimate represents a 45.77% increase from the last price of 6.86.

Source: Financial Times.com

Source: http://www.reuters.com/finance/stocks/estimates?symbol=ONNN.O

Investment Highlights

ONNN last month announced that it has been named a winner in Electronic Product China (EPC)’s “Top 10 DC-DC Awards 2009” for its NCP1034 high voltage PWM controller. This is the seventh consecutive year that ONNN won the award. Products honored with this award bear innovative designs, help realize significant technology improvement, or make great achievement in price-performance ratio. The NCP1034 is a flexible synchronous pulse width modulation (PWM) controller designed to operate from wide input supply voltage range of up to 100 volts (V), making it suitable for +48 V, +60 V and +100 V power supplies. The device also provides a 1 ampere (A) gate drive and is capable of producing output voltage of as low as 1.25 V. The NCP1034 drives a pair of external N-channel MOSFETs using a programmable switching frequency of up to 500 kilohertz (kHz) which allows flexibility to tune the operation of the IC to meet system level requirements. The output voltage can be precisely regulated using the internal 1.25 V reference voltage for low voltage applications. Protection against electrical faults, such as under voltage lockout and hiccup current limit, is provided to give required system level security in the event of a fault.

ONNN, a leading global supplier of high performance, energy efficient, silicon solutions, has introduced 24 new 30 volt (V), N-channel Trench MOSFETs in DPAK, SO-8FL, µ8FL, and SOIC-8 packages featuring enhanced switching performance for synchronous buck converters in computing and game console applications. The new series of MOSFETs utilize ON Semiconductor’s proven Trench technology to deliver superior on-state resistance [RDS(on)] and improved switching performance for synchronous DC-to-DC converters in PC, server, game console, VRM, and point-of-load applications.  DPAK, SO-8FL, and SOIC-8 package solutions – which are a drop-in replacement for NTD48x, NTMFS48x, and NTMS48x series– and the new µ8FL 3.3 mm x 3.3 mm solution achieve industry-leading low RDS(on) in relation to packaging size.

ONN this month announced the availability of two new Digitally Programmable Potentiometer (DPP™) ICs suitable for high accuracy and stability for variable resistance adjustment applications in a wide range of industrial and consumer products. The CAT5270 and CAT5271 are dual-channel digital potentiometers with 256 resistor taps for fine resolution adjustment and an I2C-compatible interface for maximum interoperability. The new ON Semiconductor DPPs feature a volatile wiper register making them ideal for applications using a microcontroller (MCU) with on-chip memory for wiper recall, or for systems that do not require memory. They also provide a low-noise, reliable and space-saving alternative to mechanical potentiometers with the added benefit of immunity to dust / dirt contamination and vibration. The CAT5270 allows microprocessor control of up to 16 devices from a single bus, while the CAT5271 offers a single, fixed address. Both devices are available with end-to-end resistance options of 50 kilohms, (kΩ) and 100 kΩ and can be used as a potentiometer or as a 2-terminal, variable rheostat. The volatile wiper register for both devices is set to mid-scale on power-up. The CAT5270 and CAT5271 are insensitive to mechanical vibrations, shock, oxidation, dust, dirt and other contamination and are a fraction of the size of mechanical potentiometers. They have a low temperature coefficient of 100 parts per million per degrees Celsius (ppm/ºC) making them much more stable and reliable than mechanical potentiometers across a wide variety of environmental conditions.

Source: Scottrade.com, Reuters.com, http://www.onsemi.com/PowerSolutions/pressRoom.do

Technical Analysis

Source: www.stockcharts.com

Moving Average Price Compare

ONNN is below its 50 day moving average. This bearish sign is even more significant because the moving average is also trending lower.

Bollinger Bands

ONNN’s recent volatility has been greater than normal. This is evidenced by the increased distance between the upper and lower Bollinger Bands. These bands measure volatility using standard deviation and a large width is due to high volatility. Additionally, ONNN is trading near its lower Bollinger Band. This suggests that the stock price is low relative to its recent price action.

MACD

The MACD for ONNN currently indicates a strong bearish signal for two reasons. First, the MACD is below the signal line, a 9day moving average. Second, the MACD is below the critical level of 0, which implies that the underlying moving averages are trending lower.

Comparative Analysis

Source: Reuter.com, Nasdaq.com

Insider Trading Activity

Net Share Purchase Activity

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