Earnings Cap a Nice Day for RF Micro

Updated from 5:14 p.m. EDT

RF Micro

(RFMD)

beat analysts' fiscal fourth-quarter sales and earnings targets Tuesday and raised guidance for the June quarter as component shipments to the handset and wireless LAN markets exceeded forecasts.

RF Micro earned $2.8 million, or 2 cents a share, in the quarter compared with a loss of $6.8 million, or 4 cents a share, in the same period a year ago. Revenue for the fourth quarter hit $100.4 million, essentially flat with the prior quarter and up 82.5% from the same period one year ago.

The company previously forecast revenue of $90 million to $95 million for the quarter. Thomson Financial/ First Call had projected a profit of a penny a share on revenue of $91.6 million.

In the late session on Instinet, RF Micro's shares were up 97 cents, or 4.8%, to $21.20. They shot up 8% to $20.23 in regular trading.

The component maker said it beat the estimates because components shipped to the handset and wireless local area networks markets exceeded original customer forecasts.

Handset sales were generally expected to fall 10% to 15% sequentially in the March quarter due to seasonal weakness, but RF Micro said it achieved flat sequential revenue by gaining share in the power amplifier market and by growing revenue in emerging growth markets.P/>"The wireless infrastructure market is weak but the handset market is doing just fine," said Dale Pfau, an analyst at CIBC World Markets. "All around it was a pretty good quarter."

Pfau is projecting 10% to 20% growth in the handset market in the second half of the year.

Based on current backlog, the company said it expects revenue of about $107 million to $110 million for the fiscal first quarter and earnings per share of about 2 cents to 3 cents. Analysts had called for earnings of 2 cents a share on sales of $100.9 million.

"We are particularly encouraged by favorable design activity with the second-, third-, fourth- and fifth-leading handset manufacturers, whose combined market share is approximately one-third of the handset market," said president and chief executive David Norbury.

Although none of these customers currently represents more than a 10th of the firm's quarterly revenue, Norbury anticipates that a number of them could become 10% customers in fiscal 2003, based upon current forecasts and production orders.

"Of note, a large number of new production orders from these customers relate to next generation, or '2.5G,' handsets, which are the handsets expected to spark replacement purchases this year," he added.

Norbury also said the firm's market share of the wireless LAN market has surpassed 10%. The wireless LAN market is forecast by industry analysts to grow about 40% this year, "and we currently project we will capture an increasing share of the market," he said.

C.E. Unterberg analyst Kalpesh Kapadia was particularly impressed with the firm's ability to gain market share.

"They were once highly leveraged to

Nokia

, now they're attracting other customers like

Motorola

,

Siemens

and

Ericsson

," he said.

Still, Kapadia wanted more information from Wednesday'sconference call regarding an increase in research and development costs andincrease in days sales outstanding.