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Anadigics surges on Qualcomm reports

ThinkEquity analyst Mike Burton expects talk of profitability this year, even if he doesn't quite believe it himself.

The value of shares in Anadigics has jumped nearly 50 percent in just a few days, as investors pre-empt better-than-predicted sales in the first quarter of 2009.

Rising from a price of $2.09 at the close of the Nasdaq stock exchange on April 7, Anadigics shares were worth $2.93 when trading opened on April 14. Mike Burton of investment banker ThinkEquity switched his rating of the power amplifier manufacturer from “sell” to “buy” on April 13.

Burton based this decision largely on talk that cell phone chipset manufacturer Qualcomm has seen business improve dramatically in the three months to March.

Qualcomm supplies reference designs to handset manufacturers that recommend PA modules from specific companies to use with its own chipsets.

“The near-term strength we ve been hearing about in the Qualcomm supply chain, we believe will benefit Anadigics,” Burton writes.

The Warren, New Jersey, GaAs firm originally estimated that it would deliver approximately $29.4 million in sales for the March quarter. Burton now predicts a higher figure of $32.5 million, but still questions whether the company is regaining business it lost in 2008.

“We remain concerned that Anadigics competitors are working hard to squash any attempts to stage a meaningful comeback,” he writes.

Anadigics itself has told compoundsemiconductor.net that despite some of its handset manufacturing customers moving orders to other suppliers of GaAs PAs, relationships with them remain cordial.

“Our customers are still talking to us,” explained Jennifer Palella, Anadigics senior director of marketing and worldwide distribution, when speaking at February s Mobile World Congress in Barcelona. “They wouldn t do that if we didn t have products with performance that they really want.”

“I ll give you a quote from one of the customers. He said: You re forgiven. There s still a scar. ”

Anadigics restructured management is now putting in place a hybrid manufacturing model that will use foundries to provide additional capacity on top of its own fabs. That should enable the company to better weather the kind of “unprecedented demand” Palella says led to the supply issues that drove customers away last year.

If the hybrid model cuts Anadigics operating expenses enough Burton says that some people might expect profitability in the second half of the year.

However, that projection would be based on the kind of growth that Anadigics has seen in the past - and Burton says that this will be elusive. “We are not expecting a profitable second half,” he concludes.

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