News

23 October 2009

 

Hittite recovery continues, driven by new products

For third-quarter 2009, Hittite Microwave Corp of Chelmsford, MA, USA, which designs and supplies analog and mixed-signal RF, microwave and millimeter-wave ICs, modules and subsystems, has reported revenue of $41.5m, down 8.9% on $45.5m a year ago but up 4.5% on $39.7m last quarter (and slightly above July’s $40-41m forecast).

Compared to 36% and 64% in Q2, 43% of revenue ($17.8m) came from customers in the USA and 57% ($23.7m) from outside the USA following a slowing in China 3G infrastructure business. However, this is expected to return to a more typical 40:60 split in future.

Revenue distribution across Hittite’s target eight markets was slightly less concentrated, with 78% of revenue being accounted for by three markets (cellular infrastructure, microwave and millimeter-wave communications, and military) compared to 82% in Q2. Automotive, broadband, fiber-optic, space, and test & measurement markets accounted for the remaining 22% (up from 18%). Six of the eight end-markets grew sequentially (compared to just four in Q2). The strongest growth came from test & measurement, followed by (in descending order) military, automotive, microwave communications, broadband and space.

Cellular infrastructure revenue fell due mainly to the exceptionally strong Q2 related to the 3G rollout in China. Fiber-optic revenue also fell due to the timing of orders. However, chairman, president & CEO Stephen G. Daly stresses that such decreases are normal short-term variations, and long-term growth prospects remain strong. The underlying favorable trend of the increased loading of existing infrastructure networks and the need to expand connectivity worldwide represents a significant growth opportunity, he adds.

Although still down slightly on 72.5% a year ago, gross margin has bounced back from a low of 70.4% last quarter to 72% (due to price, production cost, and mix). Net income was $12m, down from $13.7m a year ago but up from $10.6m last quarter (and above the forecast $10-10.9m, due to the higher revenue, improved gross margin, and lower operating expenses). Operating cash flow was $17.9m. During the quarter, total cash and cash equivalents rose from $197.9m to $215.2m.

Capital spending was $1.8m (making $6.2m for the year to date), focused on production test & assembly equipment and production mass tooling. “We maintain a high focus of constantly improving our internal manufacturing processes, supply chain management and factory efficiencies,” says Daly. “During 2009 we have more than doubled our automated die-attach and wire-bonding assembly capability. This new automation will lower the manufacturing costs for many of our products by improving throughput,” he adds. “Automated assembly also improves our product quality, which has a positive effect on production test yield, part-to-part variation and long-term reliability.”

“We introduced 21 new products and recently launched two new product lines,” Daly says. “The product line expansion and the continued growth of our product portfolio will enhance our ability to penetrate our target markets.” Hittite has more than 3000 customers, and it expects this to increase again in 2009.

With order backlog stronger than at the beginning of Q3, for fourth-quarter 2009 Hittite expects revenue to rise by up to 5% to $42.5-43.5m and net income to be flat at $11.3-12.3m.

In particular, Daly describes military, space, and fiber markets as strong, microwave communications in broadband markets as neutral, and the cellular infrastructure and automotive markets as weak. However, in terms of the long-term growth prospects for infrastructure, he notes that there are lots of good things happening. For example, the upcoming release of 3G licenses in India should provide a lot of activity over the next year or so, he reckons.

*Hittite is initiating a 300,000 share buyback program (to be completed in 3-6 months) to offset dilution from equity incentive grants issued in the past 12 months (allowing Hittite to maintain its objective of holding its share count at about 30 million shares).

See related items:

Hittite revenue rebounds, driven by China 3G roll-out and microwave

Hittite’s revenues fall 18%, but Q2 to show slight rebound

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