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RF Micro Swings to a Loss

Sales are up, but the chipmaker's second-quarter loss is attributable to investment charges.

Updated from 4:50 p.m. EDT

RF Micro Devices

(RFMD)

swungto a loss in its fiscal second quarter, because ofimpairment charges for certain investments, but salessurged on strong demand for cell-phone chips.

The Greensboro, N.C., company said Tuesday thatsales in its fiscal second quarter totaled $246.9million, up 39% from the same time a year ago, and inline with Wall Street expectations.

RF Micro posted a net loss of $19.9 million inoperating income, or 10 cents a share, compared withnet income of $5.9 million, or 3 cents a share a yearago.

Excluding a $33.8 million impairment charge for aninvestment in chip foundry

Jazz Semiconductor

,as well as stock-option compensation expenses, RFMicro said it earned 11 cents a share, a penny higherthan analysts' expectations.

Shares of RF Micro were off 3.2%, or 24 cents, at$7.25 in extended trading.

The company said revenue growth was driven by chipsales to large cell-phone handset makers, such as

Nokia

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,

Motorola

(MOT)

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and

Samsung

.

"We are benefiting as our largest customersconsolidate their market share," CEO Bob Bruggerworthtold analysts in a postearnings conference call.

Sales of cell-phone chips -- which account for thevast majority of RF Micro's revenue -- were up 5%sequentially.

Notably, the company said sales of its Polarischip, which is used in high-end, feature-rich cellphones, grew 13% sequentially, to 30% of totalrevenue. And the company said it expects Polaris salesto continue growing sequentially in the currentquarter.

On Monday,

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said that the market for high-endphones was slower than expected, putting a dent in thecompany's orders.

RF Micro executives also said they were not seeingany of the inventory buildup of wireless chips in thesales channel that has plagued some of the company'scompetitors.

"The cellular market remains strong, and RFMDcontinues to benefit from strategic R&D andmanufacturing investments made to capture growth," Bruggerworth said in a statement. "Polaris productrevenue continues to set records, and we are very wellrepresented in future-generation handsets with leadingOEMs," he said.

RF Micro's guidance for the current quarter was inline with Wall Street expectations. The companyprojected that sales in the current quarter will rangebetween $264 million and $280 million, with non-GAAPEPS of 12 cents to 14 cents a share.

Analysts polled by Thomson First Call were lookingfor $268.3 million in sales with EPS of 13 cents.

CFO Dean Priddy said the company has alreadybooked the orders to reach the low end of the revenueguidance.

He said gross margins in the current quartershould be "roughly consistent" with the second-quarterlevel.

RF Micro increased its gross profit margin duringthe second quarter by nearly one percentage pointsequentially, to 35.3%, thanks in part to thecompany's growing reliance on assembling itsproducts at a Beijing manufacturing facility.

The company is also spending $80 million to boostwafer manufacturing capacity at its Greensboro fab by40%. Priddy said that only a small amount of the newmanufacturing capacity was ramped during the secondquarter but that the company believes it will be in"good shape" for next year.