GaAs Valley

Anadigics, Inc.

Anadigics <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ANAD)") else Response.Write("(Nasdaq: ANAD)") end if %> is a supplier of radio frequency and microwave gallium arsenide integrated circuits. The development of high-frequency wireless applications in the military and satellite end markets also spawned the monolithic microwave integrated circuit (GaAs was found to operate extremely well at microwave frequencies), a technology that Anadigics championed. The company's products are used to receive and transmit signals in a variety of high-volume communications applications in cellular telephone systems and personal communication systems, as well as in fiber optic communication systems, cable, and direct broadcast satellite (DBS).

Anadigics is one of the companies in the GaAs triumvirate (with Vitesse and TriQuent) that dominates the industry. Anadigics made the leap from the military to the commercial sector in a short 6-month period in the late '80s thanks to some large, groundbreaking contracts. The company was the first to develop a chip in high volume (100,000 units) at under $10 apiece that could convert DBS signals.

Over the last three years, Anadigics has experienced a compound annual revenue growth rate of 40%. The company's gross profit margin for the second quarter of 1997 was 47.3%, compared to 46.1% in the first quarter of 1997. The increase in gross margin can be attributed to ongoing efficiencies gained in conversion to 4-inch wafers from 3-inch wafers that may accelerate going forward. Trading at 49x forward EPS estimates and over 7x sales, the company has clearly been rewarded for its stable performance in an industry characterized by major disruptions.

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