In previous conference calls, management maintained that the core power amplifier business has very good profit margins. It is the investement in new business that has been the gross margin drag for RFMD so far, namely their investement in Bluetooth and WLAN. Bluetooth should reach breakeven and profitability this year, but WLAN may continue to be dilutive for another year.
Additionally, RFMD is spending only 50% of their R&D on the core PA business...the other 50% of their R&D is going into their new product lines , the Gallium Nitride, cmosPA, and WLAN....all products that can and will contribute immensly into RFMD's top and bottom line in the future....
I listened to the CC, a couple of positive things are profit margins will be back into the low to mid 40's as these ramps are completed, they are shipping Polaris and Polaris 2 to every large OEM and volume shipments will commence this year. The best thing I heard was the fact that this quarter will be flat with revenues in the low to mid 150's which means margins are definitely improving, after all, the $169 million in revenue was flat this quarter in a profit sense. Company will be profitable this year and they are starting to obtain major business in the USA for a change, so their dependency on China will decrease which cannot hurt. They seemed very confident with this year, but they were very confident in 2004 too. So, best scenerio I see from what they said is the June quarter starts the new RFMD with all of their products finally bringing significant revenues. Until then, well, flat is flat. EDGE and Wideband CDMA is the future of this company. Time will tell. Later, The Truck
You are right Edge and wcdma is the future of this company, but please don't forget about the Gallium Nitride (GaN) which is going to be a disruptive and revolutionary technology in the wireless infrastructure applications.
Although a 2006 story, these GaN products will most likely be very high margin products and RFMD has " an exclusive license agreement in all fields of use, including electronics and opto-electronics, for all applications, including power switching and RF amplification, as well as lighting." below PR dated Oct 15 2001 when they announced the "Agreement to Acquire RF Nitro Communications, Inc."