GaAs Valley

TriQuint Semiconductor

TriQuint Semiconductor <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TQNT)") else Response.Write("(Nasdaq: TQNT)") end if %> designs, develops, manufactures, and markets a broad range of analog and mixed signal integrated circuits for the wireless communications, telecommunications, and computing markets. As one of the leaders in the industry, TriQuint has spent a great deal of energy improving its manufacturing processes and has more than doubled its wafer fabrication yields from fiscal 1990 to fiscal 1996. It also reduced production costs in its materials segment by getting raw wafers at greatly reduced prices and by ramping up production volume The net effect was a 30% reduction in costs in the three years leading up to 1996. In addition to reducing costs, Triquint is racking up design wins, supplying chips for 47 different cell-phone designs at 19 different manufacturing facilities. Focusing on low-cost packaging, efficient manufacturing, and design improvements has resulted in a 35% compound annual increase in revenues since 1993.

TriQuint Semiconductor shares plunged by almost a quarter of their value just this past Wednesday after the company announced that revenues and earnings for the third quarter will be lower than analysts' estimates (the first such shortfall in ten quarters). TriQuint said the shortfall was primarily caused by delayed new product introductions by certain wireless customers and inventory increases by other customers in anticipation of the company's fabrication relocation. On CNBC Thursday, TriQuint President & CEO Steven Sharp acknowledged that a possible "mishandling" of the news release with analysts contributed to the steep nature of the drop. Sharp added that fundamental demand for the company's products is increasing, but he projected that earnings would be flat over the next two to three quarters.

On downgrading the company to "hold" from "buy," UBS analyst Mark FitzGerald cut his 1997 earnings estimate for the company to a range of $0.85 to $0.95 per share from a previous estimate of $1.07 per share, and his 1998 estimate to $1.25 per share from a previous estimate of $1.70 per share. With these assumptions the company is now trading at 22x forward 1998 estimates, which is a discount to the expected annualized growth rate over the period of 29%. In addition, these 1998 estimates may not reflect the full production value of the company's accelerating design wins. Ultimately, the long-term investor with a multiple-year time horizon should view this latest drop as an opportunity to take advantage of an extremely profitable industry that will continue to make inroads into the traditional semiconductor arena as well as developing completely new applications.

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