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For full-year 2007, WJ Communications Inc of San Jose, CA, USA, which designs and supplies RF products for wireless infrastructure, RFID and WiMAX markets, has reported revenue of $43.9m (down on 2006’s $48.8m). Gross margin fell from 51.4% to 48.5%. However, operating expenses were cut from $35.9m to $29m (aided by completing closure of the firm’s 4” GaAs wafer fab in Milpitas, CA in March 2007). This contributed to net loss being cut from $8.4m to $7m.

For fourth-quarter 2007, revenue was $10.6m, above the updated $10.2-10.5m estimate released on 8 January (which itself was up on November’s guidance of $9.3-10.3m, due to strength within the distribution side of the business). This also represents a recovery of 7.7% from Q3’s $9.8m, following a drop from $12.7m in Q2/2007.

“Our focused execution on our cost-saving initiatives throughout the past year has resulted in a much lower-cost business model that will provide substantial upside on incremental revenue improvements,” says president and CEO Bruce Diamond.

However, in the interim, gross margin was 47.5%, down from 48.9% in Q3/2007, due mainly to the operational overlap associated with WJ’s transition of its final test and support operations to the Philippines (with some doubling up of costs such as staffing). Operating expenses have been cut from $8.2m a year ago and $6.3m in Q3 to $5.9m.

Earnings before interest, taxes, depreciation and amortization (EBITDA) has improved from negative $939,000 a year ago to +$366,000 in Q3/2007 and now +$620,000 in Q4. Net loss has been cut from $2.9m a year ago and $1.3m in Q3/2007 to $802,000. During Q4, cash, cash equivalents and short-term investments grew from $13.2m to $16.7m.

“During the fourth quarter we continued to benefit from our strategic initiatives and delivered our third consecutive quarter of EBITDA positive results and improved cash by $3.5m [up from the initial estimate of $3.3m],” says Diamond.

“Throughout 2008, we expect to continue to execute on our strategic initiatives and further improve our cost structure,” says Diamond. WJ’s move of final test and support operations to the Philippines is on track for completion in Q1/2008 and should provide cost savings of $400,000 per quarter starting in Q2. Together with the closure of the GaAs wafer fab, these two initiatives should reduce WJ’s annual cost structure by $8.8m.

Meanwhile, WJ is driving additional opportunities through the continued introduction of new products to the market, Diamond adds. During second-half 2007, WJ released 18 new products (exceeding the goal of 15), making 35 in total for full-year 2007 (compared to 21 in 2006 and only five in 2005). Diamond says that WJ will continue to make strategic investment in R&D, with a goal of introducing at least 15 new products during first-half 2008 (about 40% power amplifiers, 40% small-signal products, and 20% MCMs).

Looking forward, the pending TD-SCDMA roll-out in China should have a significant impact on WJ’s business in 2008, Diamond reckons. In January, WJ received its first production order for a TD-SCDMA multi-chip module chipset (for delivery in first-quarter 2008 to a Chinese telecom equipment and network provider, contributing about $0.5m in revenue). WJ has design wins with the key suppliers in the market, including for MCMs, HBT power products, and other small-signal products, which the firm expects to total about $100 per base-station. Current projections account for the roll-out of 50,000 base-stations in 2008, and a program total of 110,000-140,000. Diamond believes that China operators will make scheduling and volume ordering decisions in the near future.

Also in January, WJ re-engaged with what it describes as a key customer which had delayed qualification of several cost-reduced parts over the last two quarters of 2007 but has now awarded WJ a substantial portion of their next procurement. Shipments are expected to begin in second-quarter 2008 at the rate of about $400,000 per quarter.

For Q1/2008, WJ expects revenue to fall slightly to $9.6-10.6m. However, this is consistent with seasonality trends as well as those currently prevalent in the global economic enviroment, reckons Diamond. Nevertheless, gross margin should rebound to 49-51%, mainly due to savings from the transition to the Philippines.

See related items:

WJ loss widens in Q3 despite cost savings

WJ’s third quarter revenue hit by operational challenges

WJ losses prolonged by delayed fab closure and product qualification

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