TriQuint Semiconductor Inc. (TQNT) filed Quarterly Report for the period ended 2009-09-26.
TriQuint Semiconductor Inc. designs develops manufactures and markets a broad range of high performance analog and mixed signal integrated circuits for communications markets. The integrated circuits are incorporated into a variety of communications products including cellular phones and pagers fiber optic telecommunications equipment satellite communications systems high performance data networking products and aerospace applications. Triquint Semiconductor Inc. has a market cap of $781.6 million; its shares were traded at around $5.19 with a P/E ratio of 103.8 and P/S ratio of 1.4.
Highlight of Business Operations:
We experienced 2% overall revenue growth sequentially and an increase in revenue of 9% for the nine months ended September 26, 2009 compared to the nine months ended September 27, 2008, primarily as a result of an increase in revenue of 33% in the handsets market and 35% increase in revenue in the military market, offset by a decline in revenue in the networks market. The handset growth is primarily attributable to strong growth in wideband code division multiple access (“WCDMA”) and enhanced data rates for GSM evolution (“EDGE”) product revenues, which increased 79% for the nine months ended September 26, 2009 compared to the nine months ended September 27, 2008. We produce highly integrated transmit modules built using our copper flip interconnect technology which allows us to build small, robust and power efficient solutions. The current demand for increased RF content required for the higher data rates and increased functionality of 3G handset devices has allowed average selling prices to stabilize. Our opportunity in a 3G phone, which is quad band capable in the GPRS/ GSM/EDGE mode and supports 3 bands in the WCDMA mode, is $6.00 to $8.00 per unit. By comparison, our content for a low cost dual-band GSM/GPRS phone is $0.90 to $1.50 per unit. Typical functional price erosion is 10-15% per year, offset by increasing content. We believe the fundamental drivers of continued long-term growth in the handset market remain solid as the number of new users in developed countries grows and existing users are adopting 3G enabled handsets that offer additional features and functionality compared to a traditional 2G handset. These more sophisticated handsets, sometimes called Smartphones, which incorporate a variety of features, and offer wireless broadband access enabled by 3G technologies, represent one of the fastest growing portions of the handset market. This transition to more sophisticated handsets increases the RF content in each device, increasing our addressable market. Further, China, India and other emerging countries with improving economies are growing the traditional 2G market as well as the new 3G market by introducing a new customer base. In the past, however, during times of growing demand we have also experienced significant selling price pressure on some of our highest volume products.
Revenues from the defense & aerospace market are generally for products in large scale programs with long lead-times. Once a component has been designed into an end-use product for a defense & aerospace application, the same component is generally used during the entire production life of the end-use product. Currently, we are actively engaged with multiple defense & aerospace industry contractors in the development of next-generation phased-array radar, communications, and electronic warfare systems and have key design wins in major projects such as the F-35 Joint Strike Fighter (“JSF”), B2 Bomber, and Active Electronically Scanned Array (“AESA”) airborne radar as well as many smaller programs and increasing our participation in naval ship borne radar. In 2008, we launched a new family of GaN power amplifier products and PowerBand, a disruptive new technology enabling wide bandwidth with output power and efficiency performance previously restricted to narrow band amplifiers. These products also have crossover application in our aerospace and networks markets. In addition, we continue to win and execute government-funded technology development programs. Our multi-year contract with DARPA GaN contract to develop high power amplifiers, which began in 2005, is currently in Phase III, a $16 million program expected to generate $16 million of revenue over 2 years. From the Office of Naval Research, we are executing a $4.5 million, 2 year contract to advance GaAs power technology. We were recently awarded a new contract from DARPA for the Nitride Electronics NeXt Generation Technology (“NEXT”) that is expected to result in approximately $16.2 million in revenue over 4.5 years. During the third quarter of 2009 we received increased contract-based revenue for research sponsored by the U.S. government and defense industry as, compared to the same period in 2008 when we saw a pause in funding between phases of major programs.
In addition, as a result of the sale of our former optoelectronics operations, we received as partial consideration $4.5 million of preferred stock and an unsecured promissory note from CyOptics for $5.6 million, that was discounted by $2.3 million to reflect the current market rate for similar debt of comparable companies. CyOptics paid $1.1 million towards the promissory note for the nine months ended September 26, 2009 and September 27, 2008 On October 9, 2007, we participated in an additional bridge financing where we purchased $0.5 million of a subordinated convertible promissory note from CyOptics which converted into preferred stock on July 24, 2008. The carrying value of the investments is $2.1 million as of September 26, 2009.
In December 2008, we received a letter of intent from Millennium Partners (“Millennium”) and signed a definitive agreement to sell the preferred stock and debt to Millennium for approximately $3.8 million, inclusive of certain purchase adjustments. On February 13, 2009, we received notice from Millennium indicating that it no longer wished to pursue completion of the purchase of our preferred stock and that it believed it had the right to purchase the note for $1.0 million. We dispute Millennium’s interpretation of the agreement and do not believe any transaction with them is probable.
In January 2008, we made a $63.3 million dividend distribution from our Costa Rica subsidiary. Of the $63.3 million dividend, the majority was from previously taxed income with the remainder taxed in 2008 on which a deferred tax liability was established in prior years. No provision has been made for the U.S, state or additional foreign income taxes related to approximately $99.0 million of undistributed earnings of foreign subsidiaries which have been, or are, intended to be permanently reinvested.
Our revenues decreased $13.4 million, or 7%, to $173.0 million in the third quarter of 2009 compared to $186.3 million in the third quarter of 2008.
TQNT is in the portfolios of Kenneth Fisher of Fisher Asset Management, LLC.
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