RFMD upbeat on cellular despite revenue fall
Leading cellphone power amplifier (PA) supplier RF Micro Devices (RFMD) has recorded an 8% drop in revenue to $150.4 million for its most recent financial quarter, compared with the corresponding period last year.
Sales were also down sequentially due to the normal seasonal fluctuations in the cellular business, which represented $131.3 million of overall revenue.
Despite the fall, and a net loss of $62.2 million "“ a figure that included a $41.8 million expense related to the company calling a halt to its wireless LAN chipset development activity earlier this year "“ RFMD remains upbeat on its prospects for 2005.
CEO Bob Bruggeworth reckons that increasing deployment of high-end phones based on EDGE and W-CDMA standards will play into RFMD's hands. The GaAs chip manufacturer has concentrated a lot of effort on meeting the next-generation handset needs of its top-tier customers such as Nokia, Motorola and Samsung.
And as the handset manufacturers look to reduce the number of components deployed per handset, Bruggeworth said that these customers also want to buy more of their handset components from a smaller number of suppliers.
As the market leader in cellular PAs, that trend should benefit RFMD, which is also hopeful of expanding GaAs content in phones through its new PHEMT switches and other products.
In its full-year results for fiscal 2005, RFMD's total revenue was $634.2 million, down from $651.4 million in fiscal 2004. According to the company, sales of products for TDMA applications were down $60 million year-on-year.
RFMD made a net loss of $65.3 million in fiscal year 2005, compared with a profit of $29.7 million in the previous year.
Although W-CDMA handsets accounted for only 4% of cellular revenue in the most recent quarter, this is expected to grow throughout the year, particularly as the deployment of high-speed downlink packet access (HSPDA) protocol gathers momentum.
At the manufacturing level, RFMD has been investing heavily in new equipment as it looks to expand the GaAs capacity of its Greensboro, NC, fab.
As it works to improve fab utilization rates and wafer yields, RFMD expects its gross margins and profitability to improve through the rest of this year.
Bruggeworth also revealed that RFMD has manufactured its first GaN wafers at the Greensboro production facility, after migrating this capability from its research and development fab in Charlotte, NC.
