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Semiconductor Today Magazine


12 June 2006


Filtronic plans expansion of its compound semiconductor division . . .

Filtronic plc has announced its end of financial year (31 May 2006) trading update, the highlight of which is the company’s plan to expand the output of its compound semiconductor facility.

The performance in H2 of the financial year, compared with H1, by division was:

  • Compound Semiconductors met its target of run rate operating break even over the Q4 of the financial year with revenue growth of approximately 45%.
  • Defence Electronics saw an increase of approximately 10%.
  • Wireless Infrastructure revenue declined by 7%.

Filtronic reported a closing net debt at the end of the financial year of approximately £13m.

A key strategy for Filtronic is to grow its Compound Semiconductors division, which is seeing strong long-term market growth as the mobile handset industry adopts GaAs pHEMT-based switches. The company expects the switches to be used in around 80% of handsets produced by 2008. In view of this, Filtronic plans to expand its semiconductor facility to allow for a potential x3 increase in the size of the business over the next two years. The expansion will meet demand from a number of handset module suppliers and support the company’s agreement with SELEX. Expansion costs are estimated at £45m over the next year.

. . . and announces sale of Wireless Infrastructure businesses

Filtronic’s expansion of its Compound Semiconductors division will be partly financed by the sale of the filter-based transmit receive module and power amplifier businesses of its Wireless Infrastructure division (the “Wireless Infrastructure business” disposal) to Powerwave Technologies Inc.

“As a result of our review of strategic options, the Board decided that the Wireless Infrastructure business would have greater opportunities for growth with a larger partner. I am delighted that this will be Powerwave, enhancing its position as a leading provider in the commercial wireless infrastructure market,” said David Rhodes, Filtronic’s group CEO. “Part of the expected proceeds will be used to expand Compound Semiconductors where we have considerable opportunity to grow our presence in the supply of switch components for mobile handsets.”

The sale to Powerwave does not include Filtronic’s activities for point-to-point radio backhaul equipment or power amplifier modules, or Filtronic’s other divisions (Compound Semiconductors and Defence Electronics). Subject to the usual shareholders approval, the transaction is for 20.7m newly issued shares of Powerwave common stock and US$150m cash. Powerwave and Filtronic expect the transaction to close in Q3 of calendar 2006. The Wireless Infrastructure business’s gross assets as at 31 May 2005 were £101.1m and operating profit for the year ended 31 May 2005 was £18.1m. Filtronic is not expecting a tax charge to arise as a result of this disposal.

Product lines included in the transaction comprise transmit/receive filters, integrated remote radio heads and power amplifier products, all for use in commercial wireless infrastructure base station equipment.

Ronald J. Buschur, president and CEO of Powerwave, said of the proposed transaction: “We will be able to significantly expand our transmit and receive filter product lines, as well as complement our existing remote radio head products and RF conditioning products. We are also excited about the opportunity to add one of the premier design and engineering resources in the wireless infrastructure industry along with Filtronic’s excellent management capabilities to enhance our global position in both OEM and network operator channels. In addition, we believe that the increased purchasing power from this acquisition will enable Powerwave to achieve significant cost synergies while further leveraging our global manufacturing capabilities.”

Powerwave believes the acquisition will add strength to its position in transmit and receive filter products, as well as broaden its RF conditioning and base station solutions product portfolio. Filtronic’s Wireless Infrastructure business had a total trailing 12-month revenue run rate for the period ending November 30, 2005 of approximately ₤180.5m, or approximately $332.1m. This revenue total includes sales of the point-to-point radio backhaul equipment products, which are not included in the proposed acquisition. These products accounted for approximately ₤10m of revenues during this period.

Powerwave plans to integrate Filtronic’s transmit and receive filter capabilities into its global base station solutions as well as promote standardization of products and use of common design platforms. The Wireless Infrastructure business has engineering and design locations in the UK, US and Finland. Powerwave currently estimates that it will achieve in excess of $10m in annual cost savings following integration of the acquisition, coming from efficiencies in manufacturing, purchasing, research and development, and general and administrative overhead. The company also forecasts that combined revenues for calendar year 2007 will exceed $1.4bn.

Visit: http://www.filtronic.com

Visit: http://www.powerwave.com