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27 February 2009


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

GaAs-based broadband wireless and wireline communications component maker Anadigics Inc of Warren, NJ, USA has reported revenue for 2008 of $258.2m, up 12% on 2007. However, fourth-quarter revenue of $45.2m was down 22% sequentially and 33% on a year ago (and approaching half of Q2/2008’s $80.5m record). Top customers in Q4 were LG Electronics, Motorola and Cisco.

Wireless sales grew 19.9% in 2008 to $154.7m, including $24.8m in Q4 (down 15% sequentially and 41% on a year ago). Broadband sales grew 2% in 2008 to $103.5m, including $20.3m in Q4 (down 29% sequentially, with a decline for wireless LAN outweighing growth of $2.4m in cable business).

“We had a very strong first half due to the success of our products,” says chairman Gilles Delfassy. “However, we weren’t able to completely satisfy the high product demand at that time, which resulted in a loss of market share at certain customers in the second half,” he adds. This was also followed by the resignation of former CEO Bami Bastani.

Consequently, Anadigics’ $50m plan to construct a 6-inch GaAs wafer fabrication plant in Kunshan, China (announced in April 2007, and subsequently postponed indefinitely last August) has now been cancelled. “The most effective and efficient way to augment our existing capacity is actually with foundry suppliers,” says Delfassy who, along with new president & CEO Mario Rivas (former head of wireless semiconductor business at both Motorola and Philips Semiconductors, where he was responsible for overseeing foundries), has experience of such a hybrid manufacturing model. Anadigics should start seeing output and revenue from foundry suppliers in second-half 2009. After capital expenditure of $4.4m in Q4/2008, CapEx should consequently be no more than $5-10m in 2009.

Net loss for 2008 was $41.9m, driven by a fourth-quarter loss of $36.4m. However, this included charges of $31.4m (including $13m for China fab contract termination and $2.1m from staff reductions). Excluding such charges, non-GAAP Q4 net loss was $4.9m. For full-year 2008, non-GAAP net income fell from $23.1m in 2007 to $15.8m.

Anadigics’ loss of market share in second-half of 2008 has been compounded by the recent economic slowdown, with customers delaying orders to reduce their exposure in the weak and continuingly uncertain economic environment, says Delfassy. For first-quarter 2009, Anadigics hence expects revenue to fall 35% from Q4/2008.

After falling from more than 90% in Q2 to about 70% in Q4, fab utilization should bottom out at about 30% in Q1 (before rebounding due to the burn off in inventory). “Although we are aggressively managing expenses, the under-utilization of our fab will continue to put pressure on gross margins [forecast to be below 10% in Q1] until supply and demand are better aligned,” says Delfassy.

Previously, on 5 November, Anadigics announced cost-cutting initiatives including about 100 job cuts (15% of the workforce), costing $2.1m but expected to realize benefits of $15-20m.

Also, during Q1/2009 Anadigics has taken additional measures (costing a further $1m) to contain cost and conserve cash, including voluntary redundancies and retirement, mandatory furlough arrangements with all US staff, and the suspension of certain benefit programs. Savings for Q1 are estimated at $1.2m. “These actions are prudent in light of the change in quarterly revenue while preserving our capabilities to meet future customer demand and maintain a strong balance sheet,” says chief financial officer Thomas Shields. “We will continue to evaluate our cost structure relative to demand,” he adds.

“The plan we put in place to improve operational efficiencies and responsiveness to customers is producing results,” says Delfassy. “We are achieving dramatic improvements in cycle times, yields and delivery of new product samples. More importantly, these improvements along with the technical advantages of our products have resulted in renewed traction with our customers as we are engaged in many of their new programs,” he adds.

“Customer wins that were announced in the fall of 2008 are now ramping in production, resulting in market share gains at those customers,” says president & CEO Mario Rivas (who replaced interim CEO Delfassy at the beginning of February).

Also, in mid February, Anadigics announced availability of a NIM reference design for CATV set-top boxes and other home gateway subsystems, expanded its 4G power amplifier portfolio with a new Band 1 femtocell module, and also launched new products including the AWE6157 quad-band linear EDGE power amplifier (PA) module for 3G wireless handsets and equipment and the AWM6424 worldwide WiMAX 4G power amplifier (PA) for the 2.3-2.7GHz frequency range. “With the new designs scheduled to ramp in the second half of 2009, we believe we are well positioned to resume growth during the next product cycle,” Rivas says. “I am encouraged that Anadigics can emerge out of this downturn a stronger company.”

See related items:

Anadigics appoints Motorola, AMD and Philips veteran as CEO

Anadigics cuts 15% of workforce

Anadigics’ revenue falls more-than-expected 28%

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