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23 October 2007


RFMD’s 21% sequential growth driven by Polaris 3 shipments to Nokia and Motorola recovery

For its fiscal second-quarter 2008 (to end-September 2007), RF Micro Devices Inc of Greensboro, NC, USA has reported revenue of $255.8m. This is up 3.6% from $246.9m a year ago and a huge 21% sequentially from last quarter’s $211.6m, as it recovers from the drop in orders from Motorola that hit the first-half of calendar 2007.

“RFMD’s record September quarterly revenue performance was driven by share gains, new product cycles, a strong customer base and a robust overall handset market,” says president and CEO Bob Bruggeworth.

Compared to a net loss of $20m a year ago, net income was $14.5m (though down from $23.6m last quarter). However, on a non-GAAP basis (excluding $0.5m in start-up costs from expanding the Beijing assembly plant, $1.1m in restructuring charges from the sale of Bluetooth assets, etc), net income has risen from $6.6m last quarter to $23.4m (almost equal to $23.7m a year ago).

In the Cellular sector, RFMD says it experienced sequential growth at leading handset makers, with strength at top customers and across all major tiers of the handset market. The firm started high-volume shipments of Polaris 3 (a fully integrated quad-band EDGE RF front-end) to Nokia and anticipates an aggressive product ramp in the December quarter. Also, 3G front-end revenue grew sequentially faster than 3G unit growth, as RFMD extended its number-one position in the high-growth 3G multimode device market (becoming the first company to ship 100 million WCDMA cellular front-ends for 3G handsets).

In the Wireless Connectivity sector, RFMD grew sales of wireless LAN front-ends, driven by its leading position in wireless LAN-enabled handsets and participation in leading 802.11n reference designs. The firm also achieved interoperability of its GPS architecture with a leading handset customer’s system platform. It also began commercial shipments into the WiMAX market and experienced favorable design activity on a leading WiMAX/WLAN reference design.

In the Infrastructure sector, RFMD shipped production volumes of all five products in its RF386x family of GaAs pHEMT multi-market low-noise amplifiers (LNAs). The firm also completed customer design review for gallium nitride-based S-band military radar and started prototype testing and evaluation. In addition, RFMD started gallium nitride design activity for new markets, including CATV line amplifiers and high-lumen lighting sources.

“RFMD is benefiting from higher-than-anticipated demand for Polaris 3 and record demand for our transmit modules,” says Dean Priddy, CFO and corporate VP of administration. “The aggressive demand is temporarily impacting gross margin as Polaris 3 start-up yields are low, and the increase in demand for our transmit modules is causing higher-than-planned outsourcing of pHEMT switches,” he adds.

“As a remedy, we are driving steady improvements in Polaris yields - even as we meet upside customer demand - and we anticipate yields will continue to improve throughout the quarter.” Also, RFMD is continuing to add GaAs manufacturing capacity (announcing a $100m expansion with a second GaAs fab in Greensboro) . “We plan to reduce our reliance on outsourced pHEMT as that capacity comes online,” says Priddy (having already terminated outsourcing of GaAs pHEMT switch manufacturing at Filtronic Compound Semiconductors division (which has a 6î GaAs pHEMT fab in Newton Aycliffe, UK from September onwards). “Accordingly, we view both issues as temporary in nature and expect both to be margin levers in calendar year 2008.”

In the December quarter, RFMD expects sequential revenue growth of 4-9% to $265-280m, driven by its newly formed Cellular Handset and Multi-Market Products Groups. In the cellular handset market, RFMD is expanding its dollar content on a per-handset basis through strong sales of cellular front-ends and other high-performance RF solutions (including Polaris). The firm is also experiencing favorable design activity in its Multi-Market Products Group, and expects growth driven by multiple applications, including WLAN front-ends, multi-market LNAs and GaN devices.

"Our December guidance reflects strong market dynamics as well as continued share gains in RF semiconductors and an expanding leadership position in the industry’s highest-growth segments and customers,” concludes Bruggeworth.

*A special shareholder meeting on 29 October is being held to vote on the proposed $900m acquisition of Sirenza Microdevices (announced in August), which targets expansion into the non-cellular RF market.

See related items:

GaAs pHEMT switch market tempered by captive producers and CMOS

RFMD expands to accommodate cellular and multi-market demand

RFMD diversifies by acquiring Sirenza

RFMD’s revenues fall 11%, but forecasts 9-16% bounceback this quarter

Handset PA suppliers set for consolidation

RFMD moves up the rankings

RFMD expands Beijing assembly facility’s capabilities

Search: RFMD GaAs pHEMT EDGE Nokia Motorola