News

6 April 2009

 

RFMD’s fab utilization rebounding as orders improve

In a financial update for the recently completed March quarter, RF Micro Devices Inc of Greensboro, NC, USA says that it achieved revenue in-line with historical seasonal declines in the handset industry. During most of the quarter, factory utilization rates were managed down as the firm focused on reducing inventory and generating cash.

Consequently, the cash, cash equivalent and short-term investments balance grew by about $28m to $266m, and RFMD retired $22m of its outstanding convertible notes. The firm has reiterated its forecast for free cash flow of $80-120m in fiscal 2010 (which began on 29 March).

As the quarter progressed, order activity improved and hence factory utilization rates rose significantly. RFMD currently expects factory utilization in the June quarter to be close to historical averages due to improving demand and previously announced capacity reductions.

RFMD says that it has responded proactively to the realities of the global recession, and that its cost-cutting initiatives and expense reductions remain on track. An operating expense restructuring announced on 2 March included the elimination of about 100 jobs worldwide (about 2% of the firm's workforce) – mainly in sales, administrative and R&D staff - along with cuts in supporting expenses. About half of the layoffs were in Greensboro. The restructuring is expected to cut RFMD’s expenses by $12-15m on an annualized basis (starting from the June quarter).

Also, previously, on 24 February, RFMD announced the consolidation of its China back-end test & assembly operations from its Shanghai site into its primary facility in Beijing as well as outsourcing of certain non-core manufacturing operations. The Shanghai closure (to be completed by the end of the September quarter) is expected to reduce RFMD’s annualized manufacturing costs and operating expenses by about $4.5m (starting from the December 2009 quarter).

RFMD adds that the firm’s total capital expenditure was about $5m in the December 2008 quarter, and is expected to be less than $20m in calendar 2009 (less than a quarter of 2008's $81m).

Altogether, the firm has consequently significantly lowered its breakeven points for cash generation and operating income. It now expects significant financial leverage as global demand increases.

RFMD will provide more detailed information about its March-quarter results on 28 April.

See related items:

RFMD generates cash flow despite 25% revenue drop

RFMD generates $40m free cash flow; March quarter to be free cash flow positive

RFMD improves operating income after restructuring

RFMD’s restructuring increases losses despite revenue growth

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