We recently reiterated our Neutral recommendation on TriQuint Semiconductor Inc. (TQNT: 6.1799 -0.0501 -0.80%).TriQuint Semiconductor is an original equipment manufacturer (“OEM”) of semiconductor communication integrated circuits (“ICs”). TriQuint’s products specifically target the wireless handset segment, infrastructure networks and defense markets. The product line is strategically focused on radio frequency (“RF”), analog and mixed signal devices.
In the past, the demand for handsets has evolved tremendously, driven by an increased demand for enhanced voice, data and communication capabilities.
The RF content is increasing, with new standards that provide greater bandwidth, higher data rates and better quality of service. The RF industry is currently enjoying a rising tide of demand with 3G content expansion, healthy smartphone unit growth and a rebounding infrastructure market.
TriQuint invests significantly in developing conductors for the handset markets. The two important areas where the handset market is expected to grow in 2010 are GSM phones and Smart phones. The company focuses on launching a low cost transit module for GSM and expanding its product offerings to 3G platforms.
This shift from 2G to 3G has helped margins. Smartphones are expected to increase by more than 20% this year and require four to six times the RF content per device compared with voice-only phones.
Demand has returned to the networks business too after a slowdown. The recovery was broad-based in the networks market as growth came from all major markets such as base stations and transport. TriQuint expects increased spending on North American infrastructure to offset some softening in China. New products that support video data and voice data and voice-to-home are expected to push the strong momentum in the second half of 2010.
Going forward, TriQuint expects revenues between $200 million and $210 million in the second quarter, up from $180.8 million in the first quarter. Management was upbeat about the broad rebound in the networks market and continued strong demand for smartphones.
Gross margin is projected at 40% (excluding stock-based compensation and restructuring charges if any). Management indicated that the supply chain is getting tight and the company will need to work through the issues and increase capacity over the next three to six months.Excluding stock-based compensation charges and restructuring charges, net income is estimated at 15 cents per share.
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