News Article

Ramp-up Delay Adds To RFMD Jitters

Woes in China and suggestions of market share loss are temporary according to the GaAs giant, which expects to bounce back by the summer.

RF Micro Devices has recorded its first official quarterly loss in more than a year and may also have lost a share of its core handset market.

The company delivered a $15 million loss for the final three months of 2007, on the lower-than-expected $268 million sales that it had warned the market about in January (see related story).

Looking ahead to the opening quarter of 2008, RFMD cautioned that its sales will drop once again, to less than $230 million. The fall will be accompanied by another net loss, before the firm rebounds in the three months to June.

According to the company s CEO Bob Bruggeworth, only about a half of the drop in sales in the current quarter will result from the usual seasonality associated with the handset market.

A further 25 percent of that sales miss will be due to the build-up in inventory among Chinese handset makers that was primarily responsible for the company s poor December quarter. The final component arises from slower-than-expected ramp-up of a new low-cost product for a major customer.

Consequently, Bruggeworth was keen to tell analysts that market share losses would soon be regained, in particular with Nokia, RFMD s biggest single customer.

"As far as our largest customer, we ve done a good job servicing them," he said. "Market share does shift based on platforms. Right now we think we re a little behind where we should be and we ll get back to those traditional rates at the beginning of the March quarter."

Positive thinking
Nevertheless, thanks in part to the current fiscal year being one of RFMD s best ever for cash flow, the company says that it will embark on a share-buyback program to the tune of $150 million.

Adding to the good news, RFMD can now benefit from the availability of extra capacity at Filtronic Compound Semiconductors. If it had been in place in the December quarter, this facility would have saved RFMD $7 million on the PHEMT manufacture that it previously outsourced, according to Bruggeworth.

Coupled with the completion of the company s Shanghai packaging facility, the Filtronic deal will help the company s finances by minimizing any further capital expenditure needed in this financial year.

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