3 Reasons we Like RF Micro Devices

Posted by on Aug 25, 2010 | No comment

RF Micro Devices Inc. (NASDAQ: RFMD) designs and manufactures high-performance semiconductor components. The company’s products provide enhanced connectivity; enable worldwide mobility and support advanced functionality for cellular handsets, wireless local area network (WLAN), wireless infrastructure, CATV/broadband and aerospace and defence markets. RF Micro Devices has a diverse portfolio of semiconductor technologies and RF systems expertise. The company has headquarters in Greensboro. RF Micro Devices manufactures chips for cell-phone producers like Motorola and Nokia.

RF Micro Devices beat the EPS estimates during the first quarter by 5 cents ,or 45.5%. Even after the estimates for the second quarter were revised upward, the company managed to outperform once again by 1 cent. RFMD has been able to give above expected results due to their ability to generate higher cash flow, retire debt and expand the market opportunities. The company’s products are gaining popularity and the market outlook for them is also very good.

The company’s highest revenue comes from the cell phone segment and most of it from the smartphone segment. In 2009, approximately 60% of the world population had a cell phone, but only 17% had a smartphone. The market share of the smartphones is rising fast and it is expected that the smartphone market share will reach 1 billion by 2013. The U.S. has been the fastest growing market for smartphones. However, there is a little catch in the story for RF Micro Devices. RF Micro Devices’ biggest customer is Nokia (NYSE: NOK); however, the smartphone market is more or less captured by Apple’s (Nasdaq: AAPL) iPhone and Research in Motion’s (Nasdaq: RIMM) Blackberry. Nokia is still the world’s largest cell phone manufacturer in the world, although the U.S. market for Nokia is shrinking fast.

Even as Nokia’s market is shrinking, RF Micro Devices is still performing well on sales. The reason is that RF Micro Devices does not only have smartphone products but also normal cell phone products. Nokia still sells the highest number of cell phones around the world. RF Micro Devices also started to look for new markets and is trying to bring down their dependence on Nokia sales.

All of this has helped RF Micro Devices to substantially improve on their cash flows and paying off their debts ahead of time. The company recently announced an advanced payment of $100 million that was due in 2012. This is a reason why the stock price of the company has improved substantially.

The RFMD stock has a 52-week range of $3.65-$6.05. The stock is currently trading above its 50-day and 200-day moving averages.

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