4 August 2011

TriQuint’s Q2 and Q3 revenue hit by product focus

For first-half 2011, RF front-end product and foundry services provider TriQuint Semiconductor Inc of Hillsboro, OR, USA has reported revenue of $453.1m, up 17% on first-half 2010’s $388.3m.

However, second-quarter 2011 revenue was $228.8m (up just 10% on $207.5m a year ago and a less-than-expected 2% on Q1’s $224.3m, and below the forecast $230–240m).

Defense & Aerospace revenue for first-half 2011 was down 17% year-on-year. But, although down 11% on $26m a year ago, Q2 rebounded by 31% from Q1’s $17.6m to $23m (rising from 8% to 10% of total revenue).

Networks revenue for first-half 2011 was down 3% year-on-year. Although down 3.4% on $47.5m a year ago, Q2’s $45.8m was up slightly from Q1’s $45.6m (remaining at 20% of total revenue).

“Headwinds include macroeconomic weakness, including the tsunami, largely impacting our networking business [specifically point-to-point radio, as some Japanese customers slowed their order rates], and a steeper decline in our 2G business than I originally expected,” says president & CEO Ralph Quinsey.  

Mobile Devices revenue for first-half 2011 was up 29% year-on-year. Due to supply constraints last year for gallium arsenide (GaAs) devices and bulk acoustic wave (BAW) filters, TriQuint chose to shift capacity and focus from 2G products to 3G and LTE, resulting in a year-on-year decline in revenue for first-half 2011 of 68% for GSM and 46% for legacy CDMA (with a step-down in Q1 for GSM, and a step-down in Q2 for legacy CDMA). Revenue growth of 66% for wideband CDMA products (driven by the smartphone and data-card markets) has more than offset the decline. However, the transition has muted growth for Q2 and Q3/2011.

Q2 Mobile Devices revenue was $159.9m, up 19% on $134m a year ago but down on Q1’s $161.1m (falling from 72% to 70% of total revenue). As a proportion of Mobile Devices revenue, 2G has fallen from 19% a year ago through 11% in Q1 to just 4% in Q2, while 3G/4G has risen from 61% through 68% to 73%, and Connectivity has risen from 20% through 21% to 23%.

On a non-GAAP basis, gross margin was a slightly better-than-expected 41.4%, down from 42.3% a year ago but up from 40% in Q1.

Operating expenses rose by $2.4m from Q1’s $63.2m (28.2% of revenue) to $65.6m (28.7% of revenue), due mainly to growth in litigation expenses from $5.4m to $7.5m (related to anti-trust and IP claims against Avago Technologies over BAW filters).

Although down from $33.1m a year ago, net income was $28.9m, up 11% on Q1’s $26.1m. However, core earnings (excluding legal expenses) were up 15%, benefiting from the improved gross margin.

A rise in capital expenditure from Q1’s $51.8m to $60.7m was only partially offset by $31.6m of cash flow from operations (tripling from $10.8m in Q1) plus about $8m of cash from stock option exercises. During the quarter, cash, cash equivalents and investments fell from $198.8m to $180.9m.

For third-quarter 2011, TriQuint expects flat revenue of $225–235m, with non-GAAP gross margin of 40–42%. Operating expenses should shrink to $64–65m, including litigation expense falling to about $5m as the discovery phase of the process is completed.

“We are growing our market share where it counts, but I am disappointed our revenue growth appears to have stalled in Q2 and Q3,” says Quinsey. “When our factories filled up last year to support 34% growth in 2010, we made decisions to focus in key areas. Some products did not see the success we had planned for, particularly Android-based tablets and WLAN demand for Symbian phones. In the long run, I am sure those decisions and the way we handle them will pay off, and starting in Q4,” he adds.

“Currently, we are not as diversified in Mobile Devices as I would prefer, but we have not been idle. We have created a new capacity footprint and a product roadmap that has broad customer interest. We are leading the industry of mobile devices with the inherent advantages of co-designing the filter MMPA [multi-mode power amplifier] for efficient PA-Duplexer integration,” Quinsey claims. TriQuint is currently sampling the MMPA, targeting design wins at key customers in China and Taiwan. “The bulk of the industry volume has been and will continue to migrate towards PA-Duplexers. PA-Duplexers offer a clear advantage in layout flexibility and solution size,” he believes.

“Innovative technologies such as copper bump to flip and wafer-level packaging for duplexers are allowing us to cut the RF footprint for smartphones in half. Our best-in-class optical drivers are in high demand to support increased traffic for broadband data and video on demand. We have solid product roadmaps for share gain in cable and base-station RF,” he continues. “We have established a new capacity footprint that will allow us to leverage growth over the next several years, and we continue to benefit from our relationships in Defense & Aerospace, creating growth opportunities for advanced RF technologies and building on our technology edge,” Quinsey adds.

“Despite short-term headwinds, TriQuint’s long-term growth story remains intact,” Quinsey believes. “During 2011, we have sharpened our focus and invested in innovation to ensure we support our customers for the long-term growth opportunities ahead of us,” he adds. “Based on the current design wins and customer forecasts, I expect to return to strong revenue growth in Q4,” he adds. “Our greatest challenge is managing our growth opportunities in this strong RF market.”

See related items:

TriQuint’s quarterly revenue falls 11% to $224.3m

TriQuint grows revenue 7% in Q4, but more-than-seasonal 13% drop expected in Q1

TriQuint’s Q3 revenue exceeds guidance by nearly 8%

TriQuint grows 14.7% in Q2 after faster-than-expected Networks rebound

TriQuint grows 52% despite dip from last quarter

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