Why MACOM Technology Solutions Holdings Inc. Shares Dropped Today

What happened

Shares ofMACOM Technology Solutions Holdings Inc.(NASDAQ: MTSI), the maker ofsemiconductors and other technologies,were down as much as 14% in early-morning trading today before regaining some ground midday after the company reported its fiscal Q2 earnings.

So what

For its fiscal second quarter ended March31, MACOM reported sales of $186.1 million, up nearly 40% year over year and ahead of expectations. However, the company reported a loss far wider than in the same quarter last year at $130.1 million, or$2.14 per share. Adjusted for one-time events, including its January acquisition of AppliedMicro,earnings look much better at a positive $0.63 per share -- a 37% jump from the same period last year.

Image source: Macom Technology Solutions Holdings Inc.

Now what

The AppliedMicro acquisition was a big bet for MACOM as it seeks to grow its abilities and footprint in the cloud computing solutions industry. It should be a surprise to no one that the big growth driver for anyone in this space right now is the switch to cloud computing, and during the earnings call,MACOM CEOJohn Croteau related this industry switch and its effect on MACOM's growth potential when he said, "Personally, I haven't seen such a breakout in our part of the industry since the advent of digital handsets and smartphones decades ago. It's shaping up, yes, to be that big."

MACOM expects to earn between $0.67 and $0.71 for the current fiscal Q3 ending in July, from revenuein the range of $194 million to $198 million -- both of which would be continued strong growth over the prior year.

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