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11 September 2009


RFMD expects fiscal 2010 free cash flow to exceed forecast $80-120m

At the Kaufman Brothers 12th Annual Investor Conference in New York, Bob Bruggeworth, president & CEO of RF Micro Devices Inc of Greensboro, NC, USA, gave a financial update for the firm's fiscal second-quarter 2010 (ending 3 October 2009), saying that demand for its products is tracking ahead of plan (with further growth expected on top of the June quarter's 23% revenue growth).

Bruggeworth attributes the increased demand to two major growth drivers:

  • end demand in the cellular handset market is strong, and current customer forecasts and backlog support expectations for continued handset market strength into the December quarter;
  • RFMD reckons that it is a primary beneficiary of the increasing demand for 3G smartphones, which require 3-5 times the RF dollar content of 2G handsets.

The firm believes that it is gaining share in the cellular market and expects sequential quarterly revenue growth at each of its major cellular handset customers as RFMD outstrips growth in the handset market. Also, Bruggeworth said that visibility for the December quarter continues to improve in both its Cellular Products Group (CPG) and Multi-Market Products Group (MPG), reflecting increased customer forecasts and backlog and leading to RFMD expecting further revenue growth over its September quarter.

Accordingly, Bruggeworth reiterated RFMD's non-GAAP operating income target of 15% of total revenue and said that the firm is making progress converging on this target operating model in the near-term. In the June quarter, non-GAAP operating income was 11% of revenue, while operating expenditure was an on-target 25% of revenue and gross margin was 37% (compared to the target model of 40%).

June-quarter gross margin for MPG in particular was more than 40%. Given that MPG’s markets comprise new segments such as automated meter reading for which RFMD is launching a lot of new products and locking down new design wins, margins are expected to be boosted further. Also, later this quarter RFMD should complete the consolidation of its assembly operation from Shanghai into the Beijing plant (producing a noticeable effect on margins in the December quarter).

Meanwhile, in CPG, after RFMD in November 2008 first released products with their die size reduced by 30%, the firm expects 25% of its portfolio to be reduced-die-size products by the end of fiscal 2010. Furthermore, said Bruggeworth, that RFMD will introduce another die-size shrink of 30% by the end of fiscal 2010.

Finally, for fiscal 2010, RFMD expects to exceed the high end of its previously stated forecast of free cash flow of $80-120m (i.e. net cash provided by operating activities of $90-140m minus property and equipment expenditures of $10-20m).

See related items:

Greater-than-expected revenue returns RFMD to profit

Skyworks’ revenue rebounds by 11% from March-quarter dip

RFMD seeing better-than-expected order activity

RFMD still generating cash despite further 15% drop in revenue

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