News Article

Economic Nerves Hit RFMD And Anadigics

Although market analysts are still recommending the GaAs companies as good buys, the stock market has responded badly to a suggested slowdown in the handset business.

Shares in Anadigics and RF Micro Devices plummeted by more than 10 percent after analysts trimmed estimates of both companies' future sales.

On July 14, Jay Srivasta of Roth Capital Partners and Mike Burton of ThinkPanmure both said that Anadigics will be hit by what Srivasta summarizes as “weak macroeconomic conditions".

Srivasta pointed out that for Anadigics: “Recent reports suggest that handset sales at its two largest handset customers "“ Samsung and LG "“ may be slowing."

“Samsung appears to have begun the process of reducing its inventory levels."

Srivasta still agrees with Anadigics' revenue estimate of $77-79 million for the second quarter of 2008. However he thinks that Anadigics will disappoint by delivering sales of $82 million in the following three months, compared to other analysts expecting $83 million on average.

Meanwhile Burton lowered his estimates of the revenue that RFMD will earn in the year to March 2009 from $1.04 billion to $973.5 million.

This is partly based on a continuation of troubles that RFMD has experienced in the Chinese market (see related story Chinese handset makers send RFMD tumbling). However, Burton again points to “less-than-seasonal" sales that handset component makers are currently facing.

Despite these issues, both analysts are still rating these stocks as a “Buy".

On the same day high-profile handset market analyst Gartner said to Reuters news agency that global handset shipments would grow by a maximum of 11 percent in 2008. That is four percent down on the estimate provided at the start of the year.

This follows a series of cuts in global handset shipment predictions among analysts. Brian Modoff at Deutsche Bank has reduced his original estimate of 11 percent shipment growth for 2008 to 6.1 percent. Likewise T. Michael Walkley at Piper Jaffrey has downgraded his prediction from 11.5 percent to 10.1 percent.

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