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This Technology Company Can Deliver Long-Term Gains

August 31, 2014 | About:

Integrated Device Technology (NASDAQ:IDTI) entered the new fiscal year 2015 with solid results. The results were fantastic as the company reported improvement in all of its key metrics. It posted terrific results on the back of its RapidIO solution, timing products, and the continued ramp of its RF solutions. Integrated is seeing good growth in the business as the company is benefiting from the 4G LTE rollout worldwide. The company has a strong balance sheet, which is another key point that can be a growth driver for it in the future.

Looking beyond the results

In the recently reported quarter, Integrated Device Technology posted revenue of $126.3 million as compared to $117.5 million in the first quarter of the last fiscal year. The company was impressive on the earnings front as well. The company posted EPS of $0.17 per share, beating consensus estimates marginally. Analysts had been modeling $0.16 per share.

The company's strength lies in its three prominent businesses such as communications infrastructure, high-performance computing, and advanced power management. It has been seeing good improvement in these segments. Integrated has high expectations from communication infrastructure, which includes wireless charging products.

The end market for these products are improving at a great pace, and the company is now expecting RapidIO switches, advanced timing products, and its newer RF products for wireless base stations to contribute healthy sequential growth in the future. In addition, the company is also seeing robust demand for these products as it is seeing positive signs from customers. To support this growing demand, it is focusing mainly on areas of RF and advanced timing.

Better times ahead

Integrated Device is planning to collaborate with eSilicon of San Jose to create a leadership position in RapidIO switches. This seems to be a wise move by the company as this will accelerate and enhance future sRIO generations. IDT is seeking opportunities to bring sRIO technology to non-traditional applications areas, which will increase it opportunity by taking share from traditional ASIC programs.

Moving forward, Integrated is adding new products to its product pipeline such as VersaClock 5. This is expected to join the successful league of its fast moving products such as its third generation UFT and new 1.5 Volt PCI Express which are already seeing good times in the respective segment. With the growing usage of internet, Integrated is seeing demand for its products in areas that carry real-time services.

Moreover, it is well positioned to capture the high-performance computing end market with a good performance in DDR3 to DDR4 memory transition. Further, shifting focus to its consumer end market, Integrated is optimistic about growth in its wireless power business as the company is seeing significant traction for its leading products. On the other hand, it is also seeing growth in customers, and design wins are adding more support to its journey to improved profitability.

Wireless charging technology is rapidly gaining steam, and Integrated is bringing in next generation wireless charging receivers for minuscule form factors, which is primarily optimized for wearable applications. The company is mainly focusing on wireless charging technology and is attempting to land more design wins.

Final words

With a trailing P/E of 28.02, Integrated looks quite reasonable. Its moves are promising and with the growing LTE platform, there is a strong need of wireless products. Also, the growing traction for wireless charging is expected to improve its earnings further. This fact is further supported by its forward P/E of 20.06, which confirms its earnings growth in the future, making it a good pick.

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GuruFocus has detected 4 Warning Signs with Integrated Device Technology Inc $IDTI.
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