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24 October 2007


Anadigics’ margins dip during accelerated capacity ramp

For third-quarter 2007, Anadigics Inc of Warren, NJ, USA, which makes GaAs-based wireless and broadband communications components and modules, has reported its 10th consecutive quarter of revenue growth, to a record $59.5m. This is up 10.5% on $53.9m last quarter and up 35.5% on $43.9m a year ago. Top customers were Cisco, Intel, LG Electronics, Huawei, Samsung, and World Peace Group.

Wireless revenues were $34m (up 22% on last quarter and 45% year-on-year), spurred by continued strong momentum in 3G ($30.3m, up 14% and 50%). Broadband revenues were $25.5m (down 2% on last quarter but up 25% year-on-year), including $14m in wireless LAN and $11.5m in CATV. In particular, WiFi revenues were up strongly, by 21.6% sequentially and 42.7% year-on-year.

Net income was $2.4m, an improvement from $1.9m last quarter and net loss of $1.3m a year ago. Excluding costs from September’s acquisition of Fairchild Semiconductor’s RF Group, pro forma income was $6.5m (up from $5.7m last quarter and $1.1m a year ago). However, this was down slightly on guidance, as was gross margin at 35.1%. This is due mainly to manufacturing inefficiencies associated with the rapid build up of production capacity at its Warren fab.

“Anadigics has significantly increased its market share with several top tier customers, resulting in an unprecedented demand for its 3G, broadband CATV, and WiFi 802.11 ‘n’ products,” says Dr Bami Bastani, president and CEO. WiFi markets, in particular, continue to grow rapidly, driven by Intel’s May launch of its Santa Rosa fourth-generation Centrino platform (leading to Anadigics’ content per motherboard doubling).

“These dynamics have required acceleration in our plans to add production capacity, which have caused short-term productivity issues,” Bastani adds. These included equipment downtimes, as some tools did not ramp-up as quickly as anticipated (which impacted cycle time), and the inevitable higher incidence of mistakes by operators still in training mode (which impacted yield). “We anticipate some continuing manufacturing inefficiencies associated with the production capacity ramp throughout the fourth quarter,” says Tom Shields, executive VP and chief financial officer.

However, Bastani highlights September’s recruitment of John Coleman as senior VP of operations (formerly of STMicroelectronics, Atmel and Maxim Integrated Products) as‘timely’. “Anadigics is getting to run rates where we thought we needed to bring someone in from the silicon industry,” he says. With Coleman already making a contrbution, Anadigics will continue to address manufacturing inefficiencies in Q4/2007, Bastani adds.

Most new equipment should be in place by the end of Q1/2008, putting Anadigics’ capacity ahead of demand and enabling an annual run-rate capability of $400m by Q3/2008 (67% up on the run rate achieved in Q3/2007). In addition, the new fab under construction in Kunshan, China is on track to come on-line in early 2009, says Bastani.

"We remain confident in the company's ability to expand our financial leverage as we solve our manufacturing inefficiencies and achieve a more favorable product mix [of higher-value products in 3G WEDGE, WiFi 802.11n, and CATV] Shields says. In addition, Anadigics is engaging the merging market for WiMAX mobility products with complete reference designs, adds Bastani, claiming 70% share of the combned WiMAX point-to-point and mobility market.

For fourth-quarter 2007, Anadigics is already 100% booked to the low-end of its guidance of $65.5m. The firm expects revenues to rise 10-14% sequentially and 35-40% year-on-year to a new record, reflecting continued strong demand. Gross margin should remain at about 35%, but in Q1/2008 should return to historic levels and exceed 40% by the end of 2009, reckons Bastani. In addition, visibility for Q1/2008 is “the healthiest we’ve ever seen”, adds Shields.

See related items:

Anadigics acquires Fairchild’s RF Group design center

IQE wins multi-year contract as preferred epi supplier to Anadigics

Anadigics reports ninth quarter of growth, up 8.7%, driven by 3G

Anadigics breaks ground for 6” GaAs fab in China

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