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29 April 2009


Anadigics’ revenue falls by a third, driven by WLAN and cable shortfall

For first-quarter 2009, GaAs-based broadband wireless and wireline communications component maker Anadigics Inc of Warren, NJ, USA has reported revenue of $30.5m (down 33% on $45.2m last quarter and 59% on $74.4m a year ago). However, this is $1m above the guidance of a 35% sequential drop, due to stronger revenue from the firm’s wireless 3G product line. Customers representing more than 10% of revenue included Korean handset maker LG Electronics and Blackberry manufacturer Research In Motion.

“Our results reflect typical wireless seasonality and the effects of the economic downturn on our cable and WiFi customers,” says president & CEO Mario Rivas (who replaced interim CEO Delfassy at the beginning of February).

Wireless revenue was $21.4m, down a less-than-expected 13.9% from last quarter’s $24.8m (given seasonal trends). However, broadband revenue of $9.1m was down 55% from $20.3m, due to lower revenues from wireless local-area network (WLAN) and cable products (reflecting the economy-driven softness experienced by customers).

In particular, WLAN revenue was just $1m, reflecting the impact of ongoing high inventory levels at customers. Cable revenue fell to $8.1m. While Anadigics maintains a dominant market share with each of its cable customers, claims chief financial officer Tom Shields, demand is down due to their high inventory levels.

On a non-GAAP basis (excluding charges of $9.2m), net loss was $12.8m, up from last quarter’s $4.9m. However, this was better than guidance due partly to slightly better-than-expected gross margin of 11.1% (due to a moderate increase in fab utilization) and partly to cost-reduction initiatives driving lower-than-expected operating expenses of $16.2m.

During the quarter, Anadigics reduced its workforce by 110. Headcount is currently about 550. Over the past few quarters, the firm has also reduced variable compensation benefits substantially and taken other actions to reduce labor costs.

During the quarter, cash, cash equivalents and short- and long-term marketable securities still fell, from $145.7m to $132.5m (after capital expenditure and depreciation expense of $3.1m and $4.6m, respectively). However, the above expense controls should allow Anadigics to reduce its quarterly burn rate and conserve cash. “We continue to evaluate our cost structure relative to demand in order to preserve cash,” says Rivas.

For second-quarter 2009, despite operating expenses falling another 4.5% (to $15.5m), Anadigics expects gross margin to fall further, due to a further 8-10% drop in revenue.

Both broadband and wireless revenues are expected to fall equally. However, the main reason for the decline in wireless stems from one customer having high inventory levels that need to be worked down. Anadigics believes that there is greater opportunity for an increase in business from other wireless customers, given their short lead times, which have not been forecasted due to continued uncertainty in the markets. This could have a positive impact on revenue guidance. Even so, Anadigics does not expect growth in revenue until third-quarter 2009.

“While I am not satisfied with our financial guidance for the second quarter, which continues to reflect the impact of the economic downturn on our customers, we are confident that we have the leading technologies to service our end markets and are focused on execution, both strategically and operationally,” says Rivas.

“Our differentiated products are a key factor in driving a higher level of engagement in design activity,” he adds. During Q1/2009, Anadigics secured more than 50 wireless design wins that could enter production in second-half 2009. In particular, Anadigics’ power amplifiers are currently being designed into 3G smart-phones by not only top-tier customers LG, Samsung and Research In Motion but also Palm. After Anadigics’ production problems in mid-2008 led to market-share losses with the likes of Korean handset maker Samsung (which had been a 10% customer), if all the design wins turn into sales, then revenue from Samsung should be between one-third and one-half of the previous peak. “We continue to win back business at Samsung, and have further expanded our opportunities in the area of CDMA, EVDO and 3G with LG as well,” says Rivas.

Anadigics says that it is also actively engaged with Huawei regarding handsets, as well as plug-in cards and USB dongles. In addition, several of Anadigics’ products are now being specified by 3G chipset reference designs companies and equipment makers for data-cards, USB modems and embedded modules in PCs and netbooks, including products from Qualcomm, Ericsson, Samsung, Huawei, Sierra Wireless, ZTE and Novatel Wireless.

Consequently, Anadigics reckons that, assuming that the economy improves, it should see a return to revenue growth in second-half 2009.

Regarding Anadigics’ move towards a hybrid manufacturing model, the firm says that it has received the first parts back from its new foundry partners “We are very pleased with the results,” comments Rivas. He cautions that it takes several months to qualify parts and then to get customers to qualify them. Nevertheless, revenue from foundry-manufactured products is possible in second-half 2009. However, it will be 2010 before the mix between in-house/foundry manufacturing becomes apparent (the targeted long-term split is 80:20).

See related items:

Anadigics sales drop 22% as fab utilization heads towards 30%

Anadigics cuts 15% of workforce

Anadigics’ revenue falls more-than-expected 28%

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