9 August 2011

Anadigics’ revenue falls 18% in Q2 to $35.6m

For second-quarter 2011, GaAs-based broadband wireless and wireline communications component maker Anadigics Inc of Warren, NJ, USA has reported net sales of $35.6m, down 18.1% on Q1’s $43.5m and down 31.1% on $51.7m a year ago.

Fiscal	Q2/2010	Q3/2010	Q4/2010	Q1/2011	Q2/2011
Revenue	$51.7m	$61.3m	$60.2m	$43.5m	$35.6m

 

In particular, the firm’s largest customer, North America-based Blackberry maker Research In Motion (RIM), fell by $9m from Q1’s $16.6m (down from 38% of total revenue to just 22%). In contrast, other top customers in Q2 (Samsung, ZTE, Cisco, Huawei, and LG) yielded growth. 

“The sequential drop in net sales for the second quarter primarily reflects a decrease in shipments to one of our large North American customers [RIM], which was partially offset by the resurgence in shipments of our line amplifier products,” notes president & CEO Ron Michels.

Wireless revenue fell by 29% from Q1’s $36.2m to $25.7m (from 83% of total revenue to 72%), mostly due to RIM. However, this was partially offset by broadband revenue rising by 36% from Q1’s $7.3m to $9.9m (from 17% of total revenue to 28%).

Of broadband revenue of $9.9m, set-top boxes fell slightly from Q1’s $2.4m to $2.2m and WiFi (WLAN) fell from $1.7m to $1.2m. However, WiMAX almost doubled from $900,000 to $1.5m and cable infrastructure more than doubled from $2.3m to $4.8m.

Gross margin has fallen from Q1’s 29.4% to 20%, factoring in fab utilization falling to the low 50% range. Operating expenses were a less-than-expected $16.6m.

“Achieving a competitive cost structure and aligning our expenses to the current revenue level [while keeping R&D intact] are extremely important, and we’ve made significant progress in this regard during the quarter,” notes Michels.

Excluding a $1m restructuring charge for a workforce reduction in May (which should save about $4m annually), non-GAAP net loss was $9.4m, compared with just $5m in Q1 and a profit of $1.1m a year ago.

Capital expenditure was $800,000 and depreciation was $4.7m. Nevertheless, during the quarter, cash, cash equivalents and short- and long-term marketable securities fell only slightly from $104m to $103.4m, due to better-than-expected cash collection from customers.

“Looking forward, I am encouraged by the progress being made on new design opportunities with our other wireless customers, particularly in Korea and China,” says Michels. “We’ve received the top PA supplier rating from Samsung for our power amplifiers, based on our delivery, quality, technology, and responsiveness,” he adds. “We have three times the number of parts qualified with Samsung compared to a year ago... a leading indicator of future engagements,” he adds. “We have secured a very high profile design win on the Samsung Droid Charge, one of the top selling Verizon 4G smartphones. We have secured another high-profile design win for the LG Revolution, and our relationship continues to be strong with LG,” continues Michels. “We remained dominant on all the tablets and smartphones at ZTE. At Huawei, we recently received an award ranking us their number one PA supplier.” 

While RIM is still ramping down as expected, Anadigics continues to work closely with them on new platforms for 2012, notes Michels, adding that the firm has a 90% share on the 3G Blackberry Playbook. 

“Additionally, we remain on track with our initiatives to expand revenue opportunities over the longer term with our new products for the wireless 3G/4G/LTE and broadband markets,” says Michels. Anadigics has created a reference design team dedicated to the largest reference design partner, in order to further business opportunities with Qualcomm. “As a result, we have expanded our engagement on their future reference designs. These efforts have already generated reference design wins for us, both on the LTE Fusion and the Gobi 3000 platforms. Most of our customers will be designing with the Fusion chipset, which is expected to ramp in 2012,” says Michels.

“We are now pursuing design opportunities beyond our traditional wireless and broadband customer base to expand our marketing share,” he adds.
“We have refocused our energies on more balanced and targeted product portfolios that expand our SAM [served addressable market] in wireless from $1bn in 2011 to roughly $2bn beginning in second-half 2012,” says Michels.

In particular, in broadband, Anadigics is continuing to increase its served available market for CATV line amplifiers by incorporating gallium nitride (GaN) technology into its surface-mount line amplifier portfolio, and is expanding into a hybrid form factor. “We have already sampled these products and we’ve sampled them with more than 20 customers,” says Michels. “We expect to announce design wins later this year.”  

In wireless infrastructure, Anadigics is also expanding its SAM through higher-power-efficiency products, taking it beyond the small-cell femtocell markets, by using gallium arsenide and gallium nitride technologies. This has the potential to increase SAM by nearly $70m annually, the firm reckons. “We are close to finalizing a definitive agreement with a Tier 1 OEM for these products,” says Michels.

The shift in wireless customer mix, particularly to Korea and China, has led to order lead times coming down from 6–8 weeks (typical of having one dominant customer) to just 2–4 weeks. “Additionally, there is greater use by customers of hub arrangements [mostly in China]. That consigned inventory is making it even more difficult to accurately forecast revenues,” says Michels. “In light of these factors, although we continue to target our revenue plans on the basis of the second quarter being the revenue trough, we have decided to suspend our quarterly financial guidance,” he adds.

“We felt it prudent to focus our time and attention on providing the continued qualitative information required by investors and analysts, thus being dedicated to the long-term business interest than on short-term expectations,” says chief operating officer & chief financial officer Thomas Shields. “This comes especially in light of our inability to accurately forecast revenue resulting from the shift in customer order lead times and the movement by key customers to hub arrangements,” he adds.

“Our corporate capacity strategy remains intact, with dual production sourcing coming from within our New Jersey fab and through our foundry partnership with WIN Semiconductors in Taiwan,” continues Shields. “We are making sure that some portion of what we are shipping in high-volume production next year will be done at WIN, regardless of the fact that we still have 50% of utilization here that we want to fill. But we absolutely will not get caught with not having enough capacity,” he adds. Utilization at Anadigics’ New Jersey fab is expected to rise throughout Q3.

See related items:

Anadigics’ sales fall 28% in Q1 to $43.5m

Anadigics’ sales fall less-than-expected 1.7% in Q4 to $60m

Anadigics’ revenue grows 18.6% in Q3 to $61.3m

Anadigics enters profit as sales rise 18.7% in Q2 to $51.7m

Anadigics revenue rises 4.1% to $43.5m as loss is cut further

Anadigics’ sales rise 13.9% in Q4/2009

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