NEW YORK-Although it recently affirmed its ratings on Semtech Corp., a wireless device semiconductor maker, Standard & Poor’s Corp. revised downward its ratings outlook for the company to reflect “stresses” in its target markets.
Semtech, headquartered in Newbury Park, Calif., provides power regulation chips for cell phones and other handheld communicators and measurement chips used in semiconductor testing machines.
“Phone sector sales have been affected by stalled handset market growth, while the testing chip business has been affected by worldwide declines in the semiconductor industry,” said Bruce Hyman, an S&P analyst, in his report on Semtech.
Standard & Poor’s affirmed its speculative-grade rating of B on the company’s overall corporate credit and lower-tier, speculative-grade rating of C-plus on its outstanding convertible subordinated notes. However, the rating agency downgraded to stable from positive its outlook for the company’s debt.
“The ratings reflect the company’s niche position supplying analog and mixed-signal semiconductors and its currently ample liquidity,” Hyman said.
“These factors are offset by the company’s modest overall market presence, high leverage and its exposure to the pressured cell phone and semiconductor testing markets.”
Although constraints on profitability and operating cash flow levels likely will limit “ratings potential over the intermediate term,” Standard & Poor’s said it believes Semtech has “good financial flexibility to provide downside protection.”
