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22 February 2007


WJ grew 54% in 2006, tempered by Q4’s wireless infrastructure slowdown

WJ Communications Inc of San Jose, CA, USA (which supplies wireless infrastructure RFICs and multi-chip modules as well as RFID reader modules) has reported five-year record high revenue of $48.6m for 2006 (up 54% on 2005’s $31.6m). Gross margin rose from 46% of revenue in 2005 to 51%. Operating loss was halved from 2005’s $22m to $11m.

“We achieved significant year-over-year revenue growth while managing transitions in our business, including the pending closure of our wafer fabrication facility [in Milpitas, CA],” said president and CEO Bruce Diamond. The fab closure is expected to yield quarterly cost savings of $1.0-1.25m upon completion, as WJ transitions to a fabless business model (outsourcing GaAs and InGaP HBT wafer production to foundry partner Global Communication Semiconductors Inc of Torrance, CA).

However, for fourth-quarter 2006, revenue was $11.1m (down on Q3’s $12.7m and $11.7m a year ago). Gross margin fell to 44.3% (compared to 55.7% in Q3 and 49.5% a year ago) due to lower revenue, a less profitable mix, a charge of about $400,000 associated with the fab closure, and a rise in inventory reserve charges. Operating loss rose from Q3’s $2.3m to $3.3m.

"In late 2006, the wireless infrastructure industry experienced widespread weakness in demand, and we believe this slowdown will continue into the first quarter,” says Diamond.

“However, based on customer feedback and traction for our newly introduced products, we expect 2007 to be another year of growth,” says Diamond. During 2006, WJ introduced 21 new products (five times as many as were introduced in 2005). WJ also secured the first major design win for its 28V InGaP HBT power amplifier products (introduced in November).

“We continue to gain traction and increase our growth opportunities across all of our target markets, with particular emphasis in wireless power, WiMax and RFID,” he continued. “We believe that our aggressive product introductions in these markets will further our penetration and drive growth in 2007 and beyond. The pending closure of our wafer facility, and the associated cost savings, will provide additional improvement to our financial results,” he adds. WJ aims to introduce 15 new products in first-half 2007, believing that accelerated rate of product introductions will help drive future revenue growth.