News Article

Record-breaking Year Sees RFMD Bust $1 Billion

A five-fold increase in profit and record annual sales sees RF Micro Devices in a buoyant mood, despite caution over the immediate impact of problems at key customer Motorola.

US mobile communication chip maker RF Micro Devices has recorded a vintage fiscal year, with annual revenues breaching the $1 billion mark for the first time and annual profit of $83.4 million, up from $16.3 million in the previous year.

Despite the record figures, less pleasing were the results for the most recent quarter, and expectations for the next three months.

Quarterly profit dipped 49.2% sequentially to $30.1 million, and was projected to diminish to near-zero in the three months to June, as Motorola cut orders in response to its inventory surplus.

Despite admitting to being cautious in their assessment of the current trading environment, CEO Bob Bruggeworth and CFO Dean Priddy spoke confidently of the company's longer-term prospects.

In particular the strength of RFMD's relationship with Nokia offers hope in light of the situation with Motorola.

“From the standpoint of Nokia's total spend on the types of products that we develop," explained Bruggeworth at the investor conference call for the company's results, “we've grown with them year after year."

“We, as a team, come together and design compelling products that they want to buy and we're quite confident that we can continue to grow with Nokia with new products that we're bringing out."

After recording the first revenue for GaN technology in this quarter, the wide-bandgap material features highly in the company's plans.

“We think the gross margin in our infrastructure business will be almost double the company average," commented Priddy.

“In the initial phases the GaN ramp-up will be quite slow, but once it gets started it could take off fast, especially by winning one of the higher volume, high-power amplifiers for base stations."

“We re supplementing that with other GaN driver amps, PHEMT low-noise amplifiers and switches for infrastructure which will have significantly more than the company average margins," added Bruggeworth.

“If you blend that all together we expect that to have meaningful impact on margins in the coming year."

Morgan Stanley s Aaron Husock responded to the figures by predicting big challenges for RFMD, citing “the move to single chip baseband/transceivers and a peaking EDGE market," as the principal cause for concern.

However, RFMD refuted any suggestion that these developments will be an issue, particularly in the longer term.

“We really don't see a single-chip EDGE solution impacting our EDGE transceiver system revenue in fiscal year 2009 at all," explained Priddy.

“We work on designs with both the leading providers weekly," said Bruggeworth, “and will continue to prosper if that transition takes place."

“We just hope it will drive more unit volume for the industry and growth for RFMD."

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