Cirrus Eyes Voice Technology for Growth, Amid 29 Percent Revenue Drop

Fiscal Q3 2014 revenue at Cirrus Logic fell 29 percent on changes in pricing structure and a shift in mix to products with lower selling prices, the company said in a shareholder letter issued Tuesday ahead of its earning call. Cirrus’s largest customer, Apple, was about 84 percent of Cirrus’s total net sales for Q3 of fiscal year 2014 and 91 percent for 2013, and 81 percent of the company’s total sales for the first nine months of fiscal years 2014 and 82 percent for 2013, Cirrus said in a 10-Q filing.

Cirrus, which bought Acoustic Technologies in December, believes voice is the next catalyst to fuel growth in portable audio as a key interface for mobile devices through voice capture, automatic speech recognition enhancement and far field multi-microphone technology, it said. Low-power components enable products to be always on and ready to respond to commands, the company said. The market is in early stages but Cirrus expects to be a key player due to its signal processing expertise, engineering and portfolio of low-power components, it said.

Cirrus plans to introduce new voice processing products this quarter for the “broader mobile market,” combining Cirrus’s components with Acoustic’s noise reduction, echo cancellation and voice enhancement software, it said. According to CEO Jason Rhode, Cirrus’s voice-based technologies will mature first in smartphones but then potentially have “lots of legs” in other form factors, including automotive and devices within the Internet of Things. The Internet of Things means different things to different people, he said, but to Cirrus it means “voice interface to your devices,” he said. The company expects to optimize products for that application going forward.

In the nascent LED lighting market, part of Cirrus’s energy segment, Rhode expects a “significant growth market” in LED lighting, but so far the market is “a lot more fragmented than we expected.” Manufacturers have launched a number of SKUs as they try out different approaches, he said. “I don’t think anybody has really hit a home run” on what LED light bulbs should look like, he said.

Developments over the past year show that certain LED form factors “are a lot more discriminating” in dimming compatibility than others, Rhode said. “Everybody gets excited about whatever the latest, cheapest A19 form factor bulb is,” he said, but in North America those are the “least likely lamps to be connected to dimmers,” he said. MR16 and PAR lights used in ceiling applications are much likely to be on a set of dimmers “and therefore put a lot more value on dimmer compatibility,” he said.

Cirrus plans to work on more programmable, more customizable LED drivers “so one piece of silicon can target a wide variety of platforms and do so at a very, very low bill of materials cost basis,” he said. Its strategy is to compete with solutions “where there’s literally no IC involved,” he said. In that scenario the user experience “is improved significantly” while the product is simplified for Cirrus’s customers, he said. LED lighting is “an interesting market,” but it’s “always a bumpy road when you enter a new market with new technology. We're slugging through it,” he said.

Net sales for the quarter ended Dec. 28 were $219 million versus $310 million in the year-ago quarter, while net income fell to $42 million from $68 million. For the March quarter, Cirrus forecasts revenue of $130 million to $150 million, it said, with gross margin between 47 and 49 percent. Shares closed 8 percent lower Wednesday at $17.28.