RF Micro Narrows Loss

Sales of the company's Polaris chips for cell phones grew 78% sequentially in the fourth quarter, making up more than 25% of RF Micro's overall revenue.

The company added two new Polaris customers during the quarter, bringing the total number of cell phone companies using the product to 12.

Despite the strong Polaris sales, gross margin levels in the fourth quarter dipped to 35%, from 36.2% in the third quarter. The decline was due to manufacturing inefficiencies associated with the company's moves to increase its chip-building capacity, according to the company.

In March, RF Micro announced that it will spend $80 million to expand its chip manufacturing capacity by 40%.

As RF Micro works out the kinks in getting the new capacity online, and increases its internal assembly operations in China, the company expects margins to grow later in the year. In the current quarter however, gross margins are expected to remain flat.

RF Micro is also planning to raise prices on certain of its products, executives said.

"We want to make sure that the investments we are making in our capacity are ones that we can afford to make and get a good return on," said Bruggeworth.

The company projected that sales in the current quarter would range between $230 million and $245 million, with EPS between 5 cents and 7 cents, or 8 cents to 10 cents excluding the stock compensation expenses.

On that basis, the average analyst expectation called for first-quarter sales of $200 million to $215 million, with EPS between 6 cents and 7 cents.

"We enter fiscal 2007 with a robust handset market, exceptional customer relationships and a broad-based product portfolio," said Bruggeworth in a statement.

Shares of RF Micro recently rose 3.6%, or 30 cents, to $8.58 in extended trading.

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