A Good Deal
The deal illustrates that RF will buy TriQuint for $1.6 billion and create an entire new company. The merger is very compatible for both the companies. RF Micro is well set with Samsung, and TriQuint is a major supplier of Apple, derives almost half of its revenue from it. This merger is expected to generate cost benefits of million. Therefore, this is an excellent deal for both RF Micro and TriQuint, will be in a solid position to benefit from growth in smartphone shipments.
Moving ahead, RF Micro is expecting growth in revenue due to design wins in marquee smartphones and tablets. The declaration of second-quarter results of Apple resulted in a strong gain for the company's shares. RF Micro’s design wins in Apple's latest iPhone 5s and 5c benefited it. Canaccord describes that RF Micro had gained dollar content in Apple's iPhones last year and if this trend continues this year as well then the company could see some big gains.
There was a strong expectation throughout the year that Apple will launch two iPhones with bigger screen sizes. Brian Marshall of ISI Group expects that the introduction of a big-screen iPhone 6 should lead to "massive upgrades" and bring in enormous number of Android users to Apple. Hence, the product development of Apple could be a big boost for RF Micro.
In addition, as TriQuint is also a key Apple supplier along with that of RF Micro so this merger should see more gains.
Efficiency in the Cards
RF Micro is concentrating on a flexible sourcing strategy to reducing gas and silicon costs. Further, RF is also introducing assembly capabilities to reduce packaging costs by reducing usage of precious metals in the manufacturing processes. The company is also focused on leveraging its new higher-unit volumes across its supply chain to reduce costs.
RF Micro is looking at multiple growth drivers apart from mobile devices. The internet of things, automotive Wi-Fi, and wearable gadgets are expected to drive its business in the future. The adoption of new technologies by consumers is encouraging RF Micro as well. For example, the shift of preference of users from 2G to 3G smartphones in certain developing countries is good news for the company since the 3G components have higher margins.
On the other hand, RF Micro's dollar content opportunities are improving with the growth of new technologies such as like envelope tracking, carrier aggregation, and transmit MIMO. Apart from these, the introduction of LTE, along with LTE Advanced, could even boost the demand for RF Micro's connectivity solutions.
In, RF Micro's ultra-low cost CMOS power amplifiers are being adopted for the low-cost product segment at a healthy pace in next-generation handset platforms in the emerging markets. Going forward, the customers' migration to ultra-low cost products is expected to drive margin growth.
RF Micro Devices is looking like a profitable investment option from all angles. The company's merger with TriQuint Semiconductor will enhance its performance to a great extent because the combined company will benefit from two big smartphone companies. The growth is projected to be driven by the flagship products of both Apple and Samsung and moreover, the expected cost synergies will improve the bottom-line performance in the future.
Hence, it would be a good decision by investors to invest in RF Micro before its merger with TriQuint.