9 May 2011

Anadigics’ sales fall 28% in Q1 to $43.5m

For first-quarter 2011, GaAs-based broadband wireless and wireline communications component maker Anadigics Inc of Warren, NJ, USA has reported net sales of $43.5m, level with the period a year ago, but down 27.8% on last quarter's $60.2m (which had been much better than the expected $57m).



Of total revenue, the firm’s largest North American wireless customer (RIM) contributed $16.6m (38%). Samsung contributed more than 12%, while ZTE is just below 10% and Huawei is just below 9%.

Revenue consisted of $36.2m from wireless (down 21% from a higher-than-expected $46.1m last quarter) and just $7.3m from broadband (almost halving from the higher-than-expected $14.1m last quarter). Of broadband revenue, there was a halving for both set-top boxes (from $4.9m to about $2.4m). Infrastructure (from $4.6m to $2.3m) and WiMAX fell by even more (from $2.4m to about $0.9m), while wireless LAN fell less (from $2.1m to $1.7m).

“The decrease in net sales at our largest customer is the result of programs reaching end of life and a loss in market share related to the customer’s change in chipset vendors [to Qualcomm] that do not utilize our power amplifiers [for which products were not qualified in time for a ramp of their new programs],” says president & CEO Ron Michels. “We remain actively engaged with this large customer and its chipset vendors on next-generation platforms,” he adds.

Gross margin has fallen sharply from last quarter’s better-than-expected 37.7% to 29.4%. Non-GAAP net loss was $5m, almost double the $2.7m a year ago and compared with income of $4.9m last quarter. During the quarter, cash, cash equivalents and short and long-term marketable securities fell slightly, from $106.1m to $104m.

For second-quarter 2011, Anadigics expects Broadband sales to rise sequentially by about $2.5m (37%) to $10m, driven by growth in the cable infrastructure product line. However, despite expecting a rise in revenue from all other key wireless customers (including Samsung, ZTE and LG), shipments to RIM will fall by $10m (to $6–7m). So, overall Wireless sales will drop 25–31% to $25–27m. Total net sales are hence expected to fall by $6.5–8.5m (15–19%) to $35–37m.

Gross margin is expected to fall further, to 20–21%, as the rise in higher-margin broadband revenue will be insufficient to cover the decline in wireless. Fab utilization will drop to probably below 50%, reckons chief operating officer Tom Shields. “Inventory did rise because we anticipated a much higher revenue rate during the second quarter, so we have to pull back,” he adds.

While Samsung will be joined by both ZTE and Cisco at more than 10% of revenue each (the latter driven by a rebound in cable infrastructure business), RIM will plummet from Q1’s 38% to just 18%.

“While we’re working very closely with this customer and its chipset vendor on next-generation reference designs and customer platforms, we will experience further reductions in revenue from this customer through the remainder of this year as several of their products approach end of life,” notes Michels. Revenue from RIM is expected to fall to below $5m in Q3/2011 and perhaps less in Q4. “This significant quarterly revenue change will make the remainder of 2011 challenging as we work very hard to replace the revenue with new business,” he adds.

“We continue to place a strong emphasis on gross margin improvements,” says Shields. “A re-evaluation is well underway to ensure we address and accelerate the right programs for gross margin optimization,” he adds.

“Our first priority is to refocus the company and drive efficiencies across the organization. We are proactively taking steps to align our cost base with revenues over the short-term, while prudently allocating resources to further expand our technology base and product offerings,” says Michels. “We’ve reduced our workforce by just under 10% over the last few days, and we’re taking prudent measures to further streamline operating expenses to properly adjust for the lower revenue base,” he adds. The cash cost of the workforce reduction will amount to $1m and should result in annualized savings of $4m.

In Q2/2011, total cash consumption will be $9–10m, including cash payments totalling $3.7m for the management separation and workforce reduction. Together with $1m allocated for capital expenditures, cash and cash equivalents should fall to $94–95m.

“We have undertaken other cost-reduction initiatives where appropriate, without jeopardizing our R&D efforts,” says Shields. “New product development will be a critical area of focus as we increase the breadth of our product portfolio,” says Michels. “We are already heavily engaged with all of our customers and are actively pursuing several new opportunities across both Wireless and Broadband. We have multiple products that are expected to be designed into many wireless platforms, which include Samsung, ZTE, Hauwei, which could potentially increase our market share with these customers,” he adds. “We have an expanding technology pipeline and strong relationships with our current customers.”

See related items:

Anadigics’ sales fall less-than-expected 1.7% in Q4 to $60m

Anadigics’ revenue grows 18.6% in Q3 to $61.3m

Anadigics enters profit as sales rise 18.7% in Q2 to $51.7m

Anadigics revenue rises 4.1% to $43.5m as loss is cut further

Anadigics’ sales rise 13.9% in Q4/2009

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