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Q3 2010 Earnings Call

November 1, 2010 8:30 am ET


Tom Shields - EVP and CFO

Mario Rivas - President and CEO


Anthony Stoss - Craig-Hallum

Harsh Kumar - Morgan Keegan

Edward Snyder - Charter Equity Research

Aalok Shah - D. A. Davidson

Todd Koffman - Raymond James

Quinn Bolton - Needham and Company

Richard Shannon - Northland Capital

Cameron Wright - Jay Fishman



Good morning. At this time, I would like to welcome everyone to the ANADIGICS third quarter earnings conference call. (Operators Instructions)

Thank you. I'll now turn the call over to Tom Shields, Executive Vice President and CFO.

Tom Shields

Good morning, everyone, and welcome to the ANADIGICS third quarter 2010 earnings conference call.

Before we get started, please remember any comments made in this call by management as part of prepared remarks or in response to your questions may contain forward-looking information. Such information is subject to risks and uncertainties as described in this morning's press release and in the company's various filings with the SEC.

I would like now to turn the call over to Mario for his opening remarks.

Mario Rivas

Thank you, Tom, and good morning everyone. I'm very pleased to report that results were unexceptional for the quarter for the company, which exceeded our expectations and previous financial guidance. Growth during the quarter was driven by continued momentum in the 3G and 4G wireless market as well as plans in cable infrastructure on WiMAX.

Revenue for the third quarter was $61.3 million, representing a sequential increase of 19% versus the guidance of 11% and reflects a 67% increase year-over-year. The better than expected revenue growth during the quarter was driven by an increase in term business mostly in wireless.

Wireless revenue increased 18% sequentially, and broadband revenue was up a solid 20%. Our team did an outstanding job successfully building and meeting customer orders on short notice during the last month of this third quarter.

The quarter also brought some other notable accomplishments, including record shipments to RIM for the Bold 9650 on installs in 3G Pearl. We also had product shipments for Samsung for the Galaxy S Epic 4G and Galaxy tablets. And we also secured multiple Android design wins at ZTE, Huawei and LG.

Our customer relationships and design win momentum continues to expand. Our top customers in the third quarter were Cisco, LG, RIM, Samsung, World Peace Group and ZTE.

Our third quarter also demonstrated strong engagement with our chipset partners. At Qualcomm, we are well positioned on both their present and future platforms, incorporating Gobi, HELP4, LTE and Multi Mode Multi Band products. With Ericsson, we are actively working on HELP4 and Quad Band H for next-generation designs.

We also formalized a relationship with Infineon through a mutual cooperative agreement, incorporating our HELP4 LTE, our Multi Mode Multi Band products. Additionally, we've also completed negotiations on a product purchasing agreement with one of the largest Tier I OEMs.

With the industry's strong market unit growth forecasted next year for wireless handsets, we expect 2011 to be a positive year for our company.

Now, I would like to talk a few minutes about our strategic initiatives, which include maintaining profitable growth, leveraging operations and the ongoing production of superior products that have enabled us to capitalize on the fast growing 3G and 4G markets.

As our results indicate, our strategy is working. In the third quarter, we delivered $0.06 non-GAAP earnings per share, exceeding our guidance of $0.04. Our operations group continues to achieve world-class product cycle times of less than 30 days with yields in the mid-to-high 90s, while we have simultaneously continued to scale our business.

Our new product pipeline produced over the last year accounted for over 40% of our revenue in the third quarter, and our supply chain remains healthy and strong.

I'll talk about what's driving our growth and the demand for our products. The demand by consumers for instantaneous connectivity anytime anywhere, a lot of which is driven by social networking, it's increasing the need for greater and greater bandwidth on the still growing 3G market. The annual growth for 3G is expected to be 35% through 2014.

And according to a recent report we received from Strategy Analytics, today ANADIGICS has a 22% global market share for wireline CDMA power amplifiers, up from 18% in the second quarter.

The demand for our integrated HELP3 power amplifiers, HELP3 HELP4 stoppers and HELP4 wideband CDMA single-band amplifiers remain strong with consistent high attach rates across many customers globally.

Turning to 4G, we are seeing carriers continue to roll out both WiMAX and LTE networks. In September, we began production of the Samsung Epic smartphone. Our AWT6264 product is now playing a key role in bringing 4G to end users as well.

ANADIGICS is at the forefront of 4G market with LTE markets introduced as early as February 2009. And since that time, we have produced some of the most innovative power amplifiers for the LTE market, including products for USB modules, new-generation handsets and femtocells.

Speaking of femtocells, according to ABI Research and our own research, this market is projected to more than double from 2010 through 2014. To capitalize on this market opportunity, ANADIGICS has leveraged its experience in 3G and 4G mobile power amplifier architectures to develop multiple products for the femtocell market with different optimal out power levels and the highest linearity and efficiency in the industry.

Let me now turn to our broadband business and what we're seeing in this market. In the third quarter, broadband increased sequentially by 20%, driven by double-digit increases in cable infrastructure and WiMAX. That said, offsetting this strong revenue growth in broadband reported in the third quarter, we are expecting a more seasonal fourth quarter that will result in a decrease in broadband revenue of approximately 25% sequentially.

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