RF Micro's Earnings Report Keeps Wireless Revival Rolling

The wireless component maker beats estimates on demand for CDMA and TDMA.
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RF Micro Devices (RFMD) took the baton from Motorola (MOT) and kept running.

Wireless investors are looking for earnings season to bring some positives to the wearied mobile-phone sector. Motorola kicked things off last week with a strapping $3.3 billion backlog and an exciting

book-to-bill ratio.

Tiny RF Micro maintained that momentum after-market Tuesday with a surprising report that included revived interest in old TDMA (time division multiple access) technology used with existing U.S. networks, strong new CDMA (code division multiple access) activity especially in Korea and a trickle of business in the up-and-coming GPRS (general packet radio service) realm.

For its second quarter of 2002 ending Sept. 30, RF Micro notched $98.3 million in revenue -- well past Street expectations of $92.44 million, in a quarter that earnings were expected to be break-even. RF Micro turned that extra revenue into 1 cent per-share earnings.

The company's sequential comparisons were extremely flattering, with quarterly revenues up 40.3% and profits higher by 87.2% over the fiscal first quarter. The second quarter of 2001's revenue ($102.2 million) and earnings (10 cents a share) marks proved harder to reach.

At a time when wireless competitors have been decelerating around the track for the better part of the year, RF Micro's uptick will give investors something to cheer, but the company is far from achieving speedy growth. CEO David Norbury forecast that the company would turn in $99 million to $103 million in revenue in the third quarter, with 1 cent to 2 cents per-share profit.

According to Multex, analysts are predicting $100 million in revenue, and were hoping the wireless player could squeeze out 3 cents a share in profits. Apparently, RF Micro's big jump in gross margins -- rising from 27.7% in the first quarter to 37% in the second -- won't last through the third quarter, falling back to the 33% to 35% range.

Management pointed to several late-coming new orders as the reason behind its Sept. 10 upward revision of revenue from $70 million to $91 million. CFO Dean Priddy said "CDMA 1X business is definitely an area of nice surprise," which will help calm the nerves of

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fans out there who are worried about delayed deployment of the 2.5 generation technology.

Norbury was happy to see TDMA orders back in the mix after a steady decline: "We thought that (TDMA) was on the down cycle everywhere. We saw some phones that were canceled in the past being revived," he said, while staying away from predicting future demand. "I wish we could say what end demand is."

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is RF Micro's largest customer, followed by Motorola.

The company avoided making any long-term estimates for its full fiscal year. Like investors, the component supplier is making do with a little bit of progress at a time.