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Anadigics soars on record quarter

After posting record quarterly sales, the GaAs chip manufacturer's stock roars back to life, rising by 33 percent.

Stock holders in Anadigics, the RFIC specialist based in Warren, New Jersey, have enjoyed a major boost, with the company's share price soaring after the firm posted record financial results.

For the first quarter of 2008, Anadigics registered $74.4 million in sales, up 50 per cent on the same period in 2007, and up 10 per cent on the traditionally strong holiday quarter immediately prior to it.

Despite posting a relatively modest profit of $3.9 million ($9.2 million excluding stock compensation expenses) on its highest-ever quarterly sales, investors swarmed to the stock, with Anadigics share price rising $2.80 to $11.09 after the results were announced.

That was largely because both revenue and profit outstripped prior expectations, as Anadigics focused on its higher-end, more profitable products while successfully expanding its manufacturing capacity without any apparent hitches.

Delighted CEO Bami Bastani said that 2008 was off to a great start, adding that Anadigics' GaAs wafer fab had "run fabulously, like a smooth engine", despite the challenges of increasing capacity to meet demand.

The fab cannot quite meet all of the demand from Anadigics customers, however, with the company admitting that it had allowed some low-end power amplifier (PA) business to drift to its competitors, instead choosing to focus on more lucrative and profitable high-end products.

One example of that was the relatively new penta-band PA, which is now shipping in large volumes for applications in 3G phones, while demand from Samsung and ZTE for PAs to be used in WiMAX deployments driven by Sprint in the US is now gathering momentum.

Anadigics is striving to add more flexibility to its manufacturing strategy to meet the expected future increases in demand. As well as adding personnel and capacity in New Jersey, Bastani is aiming to have a foundry partner in place and manufacturing in volume by the end of 2008.

That should help Anadigics to meet demand prior to the opening of its own new fab in China, which is currently being constructed and which is now expected to come online in the second half of 2009.

Investment analyst John Lau at Jefferies & Company hailed the quarter as a "great result", and immediately upped his 2008 and 2009 revenue forecasts for the company.

"These results are contrary to recent negative comments on 3G, which Anadigics indicated may be market-specific," said Lau, alluding to concerns in many quarters about the impact that a general economic downturn would have on sales of handsets, particularly high-end models.

Strong sales to top-tier handset customers like Samsung and LG for high-end phones are expected to continue growing, with Bastani and Anadigics CFO Tom Shields predicting second-quarter sales of between $77 million and $79 million.

With the lower end of that guidance figure already accounted for in existing backlog, few would be surprised if Anadigics busts its financial targets once again in three months' time.

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