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InvenSense Earnings And Technology Update

InvenSense (NYSE:INVN) has announced results for the second quarter of fiscal 2016:

  • EPS of 16 cents, beat by a penny
  • Revenue of $112.5M, beat by $1.5M
  • Guidance was $115-120M, slightly above consensus at the midpoint.
  • Business segments: 62% phones & tablets, OIS 18%, others 20%. The last category includes drones, wearables and gaming. Significant contribution from this segment is likely to continue.
  • Customers: 34% Apple, 19% Samsung

The company also reported positive cash flow for the first time in a long time, although it has been building its balance sheet very consistently. What should be more important to investors are notes from the conference call and announcements made before earnings:

New Sensors & Markets

Earlier in the month, InvenSense introduced new functionality for auto-correction of heart rate monitoring from PPG (photoplethysmography) sensors. If you're thinking, big deal, everybody does heart rate monitoring these days, then this is potentially a bigger deal than you are imagining, because the devices currently out there don't do the job so well. This is particularly true during periods of high activity, which kind of misses the target consumer, and for wrist worn devices. The results are bad enough that Apple's Watch now eschews the task entirely in such circumstances, despite containing such a sensor.

The thing is, the wrist is naturally the best place for a multifunction wearable. While the extra motion makes things difficult for PPG sensors, it is excellent for self-charging and allows for best use of displays and microphones. The question that remains here is how much this InvenSense technology helps, as the press release is fairly short on technical details. Regardless, it's good to see the company continuing to innovate, and I do think we'll...