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Qorvo Initiates Tender Offer, Seeks for Consent Solicitation

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Qorvo, Inc. (QRVO - Free Report) made a cash Tender Offer for the redemption of any or all of its 6.75% Senior Notes and 7.00% Senior Notes worth up to $150 million. The notes are due in 2023 and 2025, respectively. Notably, these are popularly known as “the Notes.” The offer is subject to certain terms and conditions.

In connection with the company’s Tender Offer for the 2023 Notes, it announced consent solicitation to amend certain provisions, related to the indenture, as of Nov 19, 2018, among “the Company, the guarantors party thereto and MUFG Union Bank, N.A., as trustee.”

The consent solicitation will expire at midnight, NY time, on Jul 13, 2018. Per its announcement, Qorvo will pay to each holder of record of Notes, who delivered a valid consent, a cash fee for each $1,000 principal amount of 2023 Notes, subject to terms and conditions of theTender Offers and the Consent Solicitation.

Wells Fargo Securities, Citigroup Global Markets Inc. and BofA Merrill Lynch were appointed as joint lead deal managers for the tender offer solicitation agents by Qorvo.

Shares of Qorvo have returned 27.8% year to date outperforming the industry’s rally of 9.2%.

Balance Sheet & Cash Flow

As of Mar 31, the company’s cash and cash equivalents were $926 million compared with $841.3 million as of Dec 30. Long-term debt was $983.3 million as compared with $1.09 billion at the end of the previous quarter.

Net cash provided by operating activities was $259 million down from $270.1 million in the previous quarter. Capital expenditures declined sequentially to $32 million.

Further, Qorvo has returned $51 million to shareholders under its ongoing share repurchase program.

Recent Developments

Qorvo recently launched five new 5G products. The company has also participated in dozens of 5G field trials and demonstrations. We believe an expanding portfolio enabling 5G deployment augurs well for the company.

Qorvo also launched two new X-band FEMs which have found ample application in active electronically scanned array (AESA) radar. The two GaN FEMs, namely QPM2637 and QPM1002 are very compact and EAR99 export-compliant.

According to a MarketsandMarkets report, the GaN power device market is projected to grow at CAGR of 29.1% to reach $1.89 billion by 2023. The base year 2017 valuation was $0.408 billion and the time period under consideration is 2017-2023.

Introduction of the new products strengthens Qorvo’s GaN portfolio and provides it a competitive edge, in the relevant market. The company is capitalizing on the lucrative prospects in defense by rendering effective GaN solutions.

To Conclude

Expanding portfolio bodes well for Qorvo. The company’s 5G and GaN solutions hold promise. The company is well poised to seize growth opportunities that the corresponding markets offer.

However, customer concentration, particularly from Apple (AAPL - Free Report) and Huawei remains a significant headwind for Qorvo.

Zacks Rank & Key Picks

Qorvo has a Zacks Rank #4 (Sell).

A couple of better-ranked stocks in the broader technology sector are Western Digital Corporation (WDC - Free Report) and Micron Technology, Inc. (MU - Free Report) , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Western Digital and Micron have a long-term expected EPS growth rate of 19% and 10%, respectively.

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