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News

4 May 2007

 

WJ losses prolonged by delayed fab closure and product qualification

For first-quarter 2007, WJ Communications Inc of San Jose, CA, USA, which designs and supplies wireless infrastructure RFICs and multi-chip modules as well as RFID reader modules, has reported revenue of $10.8m. This is down from $11.3m in Q4/2006 and $12.3m a year ago.

Operating expenses have risen from $8.2m in Q4/2006 to $9.5m due to increased R&D spending related to the acceleration of new product introductions and the operation of WJ’s 4” GaAs wafer fabrication plant in Milpitas, CA being extended longer than originally planned before its eventual closure at the end of March (completing WJ’s transition to a fabless business model). WJ acquired the fab in its June 2004 acquisition of EiC Corp's wireless infrastructure business, and had at one stage planned to close it by mid-January.

Correspondingly, net loss has risen from $2.9m in Q4/2006 to $4.6m in Q1/2007 (including $0.9m of stock compensation expenses). Gross margin has fallen from 50.2% a year ago and 45.0% in Q4/2006 to 42.7% in Q1/2007. However, this was due to the reduced utilization of the fab during the close-down process and the delayed qualification by a customer for cost-reduced parts that were originally anticipated in the quarter.

“The closure of our wafer manufacturing facility [which should result in annualized cost savings of $4-5m] represented an end to a period of transition for WJ that began in late 2005,” says president and CEO Bruce Diamond. “With the last step in that process now complete, we are able to further focus our resources on our core competencies, including the aggressive introduction of new products and technologies in each of our target markets.” WJ is on schedule to introduce 15 new products in first-half 2007, with eight sampled during Q1.

“Following the successful implementation of a number of key initiatives over the last 18 months, we believe our business is at a positive inflection point,” says Diamond. “We enter the second quarter with our highest ever OEM backlog, solid traction and a strong pipeline of business, and we expect revenue for the second quarter to increase sequentially 7-11%.”

*WJ appoints new board member

WJ has appointed Angelos J. Dassios, a principal of San Francisco-based private equity firm Fox Paine Management III LLC, to its board of directors.

Dassios was previously with Goldman, Sachs & Co in the Investment Banking Division and the Principal Investment Area. He is a graduate of Dartmouth College and was formerly on the board of directors of United America Indemnity Ltd. "His familiarity with WJ's business, coupled with his strong experience in business and finance, will assist WJ in further improving the company's growth and profitability," says Diamond.

See related item:

WJ grew 54% in 2006, tempered by Q4’s wireless infrastructure slowdown

Visit: http://www.wj.com