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Mobile and defence & aerospace market hinder TriQuint shares and revenues

The firm predicts continued weak demand from its largest mobile device customer and increased litigation costs in the next quarter. These are two of the contributors to TriQuint shares tumbling nearly 13% after the quarterly earnings release

TriQuint Semiconductor has announced its financial results for the quarter ended March 31, 2012.



Revenues for the first quarter of 2012 were $216.7 million, down 3% from the first quarter of 2011 and down 5% sequentially. Networks market revenue grew 10% sequentially while mobile devices market revenue and defence & aerospace market revenue decreased 8% and 4%, respectively.

GAAP gross margin for the first quarter of 2012 was 28.9%, down from 39.0% from the equivalent quarter last year, and sequentially from 29.5%.

Operating expenses for the first quarter of 2012 were $66.2 million, or 31% of revenue, up from $61.6 million in the previous quarter partially due to an increase in litigation expenses.

Operating income nose dived from $20.3 million in Q1 2011 to a loss of $3.6 million in Q1 2012.

Net income for the first quarter of 2012 was $1.9 million or $0.01 per diluted share, down from $4.3 million, or $0.03 per diluted share, in the previous quarter, and down from $12.4 million in the same quarter last year. Included in net income for Q1 2012 was a gain on a previously impaired investment of $7.0 million.

Cash and investments grew by $32.6 million to $194.9 million in the quarter due primarily to improved working capital management and lower capital expenditures.

During a conference call discussing the first quarter of 2012, Ralph Quinsey, President and Chief Executive Officer, commented, "I would first say that the short-term dip that we're seeing in the current quarter as, it's all about existing products. Products that have been in the marketplace." He also said that last quarter, TriQuint was seeing a good uptake of its MMPA, and transmit modules. "We're seeing that in Korea, we're seeing that in greater China," he added.

"Our revenue was better than normal seasonality in the first quarter and we saw signs of improvement in some of our infrastructure markets. While we anticipate a challenging second quarter in the mobile devices market, specifically with our largest customer, I believe this dip will be temporary and remain confident about our long term position. We have achieved design win success with our new products and I believe we will return to normal revenue levels and growth in the second half of 2012," concluded Quinsey.

When asked about who TriQuint's largest customer was, Quinsey remained tight-lipped, but did say that the declining orders were nothing to do with the firm's produts.

Regarding the mobile market, Steven Buhaly, Chief Financial Officer, TriQuint, said that with 3G/4G,  the most important issues were to have the right products, the right technology and have the capacity to grow with the customers. With 2G, however, he pointed out that due to that market being fairly competitive, TriQuint would participate, but was not in a position where it wanted "to chase a lot of low margin 2G opportunity." Quinsey, on the other hand, said, "We should see some good uptake over the next several quarters in 2G GSM."

Outlook:

The Company believes second quarter 2012 revenues will be between $170 million and $185 million. The company expects to return to normal revenue levels in the second half of 2012. TriQuint is 91% booked to the midpoint of revenue guidance.

As part of a planned transition in filter packaging technology and due to a change in product mix, the company plans to restructure its filter related operations during the second quarter.

Quinsey added that TriQuint was also restructuring in order to move from chip scale packaging (CSP) to wafer level packaging (WLP). Regarding this transition, Quinsey commented, "We are already using a first-generation wafer level packaging. It's in our dual products and we're in the sampling customer design in phase of our dual product. So I expect that will start to move into production in the second half of the year. I think by the time we get into the middle of 2013, we will be in full swing of our wafer level packaging. Keep in mind, we're not abandoning CSP. There are still markets and applications where CSP is absolutely the right situation, particularly in some of our networking applications. So we will maintain some capacity capability for CSP to support the opportunities where that's the right solution. The high, high volume solution is typically associated with mobile devices, but not always, is going to transfer to our wafer level packaging."

TriQuint expects to record a GAAP restructuring charge of between $12 and $14 million, consisting of a non-cash charge for excess equipment of between $10 and $12 million and a cash charge for the remainder that is primarily related to severance costs.

During the conference call, Steve Buhaly also said that litigation charges in the second quarter of 2012 are expected to be as high as $11 million.
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