It was in February that RF Micro Devices (RFMD) and Triquint Semiconductor (TQNT) published that they are consolidating to catch a bigger share of the radio recurrence chips market. Shares of both companies rose strongly after the declaration, as the merger will result in the formation of one of the biggest players in the business sector for integration chips. Be that as it may significantly after the merger was advertised, shares of both companies have risen 25% on fantastic results.
Both RF Micro and Triquint supply components to the biggest names in the cell phones industry - Apple (AAPL) and Samsung (SSNLF). As such, the merger of the two will make a powerhouse that will convey awesome revenue and earnings development later on for a couple of simple reasons. We should see why.
Tapping the Apple universe all the more proficiently
In the first quarter, Triquint determined 26% of its revenue from Apple foreman Foxconn. Indeed RF Micro's revenue from Apple were in the twofold digits, despite the fact that the organization didn't disclose a precise percentage. What stands out is the way that both companies picked up dollar content in the latest idevices.
So, it is clear that both companies have been picking up more business at Apple. This will be an enormous focal point for the joined together organization going ahead as Apple is likely preparing its most pivotal iphone for release this year. Apple is apparently going to release its next iphones this August, as per supply chain rumors. The first one, a 4.7-inch version, will most likely be released first, taken after by a greater 5.5-inch or 5.6-inch display in September, as reported by Reuters.
Truth be told, as indicated by the Economic Daily, a sum of 80 million iphone 6 handsets will be made this year itself. Apple may be at long last making a strong move to address the needs of customers who have needed a greater gadget from Cupertino, so the following item transition in the organization's history could accumulate new users.
A Kantar survey indicates that devices with a screen size more prominent than 5 inches represented 40% of shipments on the planet's biggest smartphone market, China. Consequently, a greater iphone, or rather an iphablet, should help Apple create more sales, eventually profiting the joined together RF Micro and Triquint.
RF Micro's Samsung presence
While Triquint's top line is skewed to Apple, RF Micro generates majority revenue from Samsung. In fiscal 2013, Samsung represented 22% of its revenue. The organization has been arriving more dollar substance in Samsung's phones and saw an incline in sales as the South Korean organization increased creation of its latest flagship, the Galaxy S5. RF Micro saw increased interest for discrete force amplifiers (Pas), multi-mode Pas, radio wire switches, discreet switches, and force administration chips.
The uplifting news here is that sales of the Galaxy S5 are following in front of its predecessor. As per Chitika, in 25 days since its dispatch, the Galaxy S5 represented 4.3% of all mainland Samsung smartphone web movement in North America. In comparison, the Galaxy S4 represented just 2% of web activity in the same time allotment last year.
Thus, RF Micro's developing clout at Samsung and the strong performance of the smartphone monster's latest flagship should lead to solid gains for an united RF Micro and Triquint.
The joined together element expects $150 million in cost synergies after the merger. Actually, both RF Micro and Triquint have been attempted cost-cutting moves in late quarters and this added synergy could prompt more noteworthy earnings control later on. In their respective last-reported quarters, the earnings direction of both companies were path in front of consensus estimates.
This is a sign of more prominent things to come as the merger would empower RF Micro and Triquint to further increase their earnings development.
They will profit from the two real smartphone launches that we see consistently, and the joined together efficiencies of both will empower them to lower costs. As such, in case you're holding shares of either organization, you would be better off clutching them instead of booking profits in the wake of arriving spectacular gains this year.