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Anadigics Reports Narrower-than-Expected Q4 Loss

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Semiconductor manufacturer Anadigics, Inc. (ANAD) reported relatively modest fourth quarter and full year 2013 results with a balanced sales mix, more efficient production and stringent cost-cutting initiatives. The company incurred a loss of $9.96 million or loss of 12 cents per share in the reported quarter, narrower than a loss of $16.06 million or loss of 23 cents per share in the year-ago quarter.

Excluding one-time items, adjusted net loss for the reported quarter came in at 10 cents per share vis-à-vis a loss of 20 cents per share in the year-earlier quarter. The adjusted loss per share for fourth quarter 2013 was narrower than the Zacks Consensus Estimate of a loss of 12 cents.

For full year 2013, Anadigics recorded a loss of $53.98 million or loss of 67 cents per share, compared with a loss of $69.85 million or loss of 99 cents per share in the previous year. Adjusted net loss for full year 2013 was 55 cents per share versus a loss of 88 cents in 2012. The adjusted loss per share for full year 2013 was narrower than the Zacks Consensus Estimate of a loss of 64 cents.

Total revenue for the reported quarter was $36.3 million, up 19.1% year over year and in line with the Zacks Consensus Estimate. The Cellular wireless segment contributed $16.7 million to total revenue, while legacy WiFi and Infrastructure accounted for $14.4 million and $5.2 million, respectively.

For full year 2013, revenues improved 19.2% year over year to $134.2 million primarily driven by a 700% increase in WiFi revenues. Anadigics has won accolades for its 11n and 11ac design wins in the mobile WiFi space and has ramped up production anticipating wider industry acceptance. In the Cellular wireless segment, the transition from 3G to 4G data services, especially in China and emerging markets, has accelerated demand for the company’s products. The ProFicient and ProVantage solutions, which help producers to reduce design complexity and cost while extending battery life, have particularly stimulated revenue growth.

During the reported quarter, Anadigics continued to improve its cost structure through stringent cost-cutting initiatives, while maintaining a sharp focus on new product developments. Gross margin for the quarter increased 1,250 basis points on a year-over-year basis to 12.8%. The margin improvement was primarily driven by higher manufacturing throughput and other operational efficiencies with an optimization of ILD (inter-level-dielectric) technology, higher yields, larger volumes of newer products and improvement on production costs.

Anadigics ended the year with cash and marketable securities of $24.4 million. Inventories stood at $21.1 million or approximately 68 days. During the quarter, Anadigics incurred $1.3 million in capital expenditures while capacity utilization was 55%.

Management did not provide any specific guidance for the ongoing quarter. For the first quarter of 2014, Anadigics expect revenues to be down 34% to 37% sequentially in the wake of seasonal and inventory related softness in Cellular and WiFi. Despite the lower revenues, considerable improvements in the cost structure, overall product cost and sales mix are expected to reap double-digit gross margins for the quarter.

Moving forward, Anadigics expects increasing mix of ILD and continued product efficiencies to support growth in 2014 and beyond. The company is working on driving R&D and SG&A efficiencies further. Its year-to-date efforts are expected to reap annualized savings of $5.5 million. At the same time, Anadigics is continuing with its workforce reduction strategy to cut annual payroll related expense by approximately $4.5 million.

Anadigics continues to focus on three market drivers that it believes will expand its served available market. These drivers include the rapid adoption of 3G and 4G data connectivity in wireless mobile devices, expansion of wireless and CATV infrastructure to support increase data use, and proliferation of high performance WiFi connectivity in mobile devices. Together with all these initiatives, the company expects to return to profitability in 2014.

Anadigics presently has a Zacks Rank #3 (Hold). Better-ranked players in the industry that are worth mentioning include Ambarella, Inc. (AMBA), FormFactor Inc. (FORM) and Himax Technologies, Inc. (HIMX), each carrying a Zacks Rank #2 (Buy).

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