1 November 2011

TriQuint’s revenue falls 6% in Q3

For third-quarter 2011, RF front-end product maker and foundry services provider TriQuint Semiconductor Inc of Hillsboro, OR, USA has reported revenue of $216m (down 6% on $228.8m last quarter and 9% on $237m a year ago). This is below the original guidance of $225–235m but higher than the revised guidance (issued on 22 September) of $210–215m.

Of total revenue by end market, Mobile Devices comprised 70%, Networks 20%, and Defense & Aerospace 10%. Foxconn Technology Group accounted for 35% of revenue (the only customer exceeding 10%).

The overall decline was due to reduced Connectivity revenues in Mobile Devices (particularly from Foxconn), weakness in the communications infrastructure market, and softening demand in China.

Mobile Devices revenue was $152m, down 5% on $159.9m last quarter (due mainly to the reduced demand from Foxconn and weakness from China-based customers including distribution partner Avnet Asia). Connectivity revenue is down as TriQuint transitions from commercial foundry to standard products in support of a wireless LAN reference design partner.

Networks revenue was $44m, down 5% on $45.8m last quarter. Radio Access revenue (dominated by base-stations) grew 10% sequentially (due to increased end-of-life shipments to TriQuint’s foundry customer), partially offsetting a 15% decline in Transport.

Defense & Aerospace revenue was about $21m, down 10% on $23m last quarter.

Year-on-year for Q3, both Mobile Devices and Networks revenue fell 9%, and Defense & Aerospace fell 7%. However, total year-to-date revenue (for Q1-Q3) rose 7% from $625.3m to $669.1m, including growth of 14% in Mobile Devices offsetting drops of 3% and 14%, respectively, in Networks and Defense & Aerospace. In Mobile Devices, year-to-date revenue from 3G/4G applications was up nearly 30% on 2010, offset by a 58% drop from 2G products due mainly to declines in legacy CDMA and GSM revenue streams (driven by decisions in 2010 to shift capacity and focus from 2G products to 3G, due to supply constraints at that time).

On a non-GAAP basis, gross margin has fallen from 41.4% last quarter to 36.3% (well below original guidance of 40–42%). This is due largely to a shift in product mix to lower-margin products, increased costs associated with new product ramps, and lower factory utilization.

However, despite $4.1m of legal expenses related to anti-trust and IP claims against Avago, operating expenses have been cut from $65.6m (28.7% of revenue) last quarter to $58.7m (27% of revenue), comprising operational spending down by $3.4m and litigation expenses down by $3.5m. This is well below the original guidance of $64–65m and below even the revised guidance of $60m.

Net income has fallen from $44.2m a year ago and $28.9m last quarter to $19m. Although capital expenditure has reduced from $60.7m last quarter to $47.3m, this was only partially offset by operating cash flow of $12.4m (down on $31.6m last quarter). During the quarter, total cash and investments hence fell by about $33.6m, from $180.9m to $147.2m.

For fourth-quarter 2011, TriQuint expects revenue of $215-225m (flat to up slightly on Q3). Weak product mix and lower factory utilization (as TriQuint burns through excess inventory, particularly in optical communications) will reduce gross margin to 32-34%. Operating expenses should be cut further to $59-60m (despite about $3.5m of litigation expense).

Capital expenditure should be cut further, to just $35m (for completion of previously committed capacity expansions), adding to year-to-date capital expenditures of $159.9m. During 2011, TriQuint has expanded total capacity by about 40% across its gallium arsenide (GaAs), surface acoustic wave (SAW) and bulk acoustic wave (BAW) lines. It also plans to be internally second sourced via its Texas 6-inch GaAs line (a copy-exact line replicating the Oregon 6-inch GaAs capabilities, but on a smaller scale), which should be fully qualified in late Q4/2011. However, beginning in Q1/2012, this will add about $5m in quarterly cost to manufacturing operations (including about $3m in depreciation expense) and will impact margins until it ramps to sufficient volume.

“The investments we’re making in increased capacity will allow us to participate in the strong market growth we anticipate over the next several years,” says chief financial officer Steven J. Buhaly. “We expect to reduce our capital expenditures in 2012, and our spending will be largely focused on capital for new capabilities versus capacity expansion.”

See related items:

TriQuint’s Q2 and Q3 revenue hit by product focus

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%

Tags: TriQuint

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