Net Income Plummets at TriQuint

TriQuint Corporation (TQNT - Analyst Report) reported a significant decline in net income in the fourth quarter of 2011, primarily due to lower revenues and gross margin. Revenues of $227.0 million in the fourth quarter of 2011 were up 5% sequentially but down 10% year over year.

Net income plummeted 71% sequentially and 90% year over year $4.3 million. EPS came in at $0.03 compared to $0.25 in the year-ago quarter and $0.09 per share in the previous quarter. Excluding restructuring charges but including stock-based compensation, earnings per share came in at $0.04, in-line with the Zacks Consensus Estimate.

In terms of end markets, Mobile Devices accounted for 71% of total revenues, Networks accounted for 19% of total revenues while Defense and Aerospace accounted for the remaining 10%.           

Revenues from Mobile Devices (the largest of the three major markets that the company serves – Mobile Devices, Networks, and Defense and Aerospace) generated revenues of $185.9 million, up 7% sequentially. 3G/4G revenues grew 20% year-over-year. This growth was offset by a decline in 2G revenue primarily due to a decline in legacy CDMA and GSM revenue due to limited capacity.

Networks generated revenues of $47.3 million, almost flat sequentially. Transport revenue grew 7% sequentially. Radio access revenue was down 15% sequentially. Defense and aerospace market generated revenues 21 million, up 4% sequentially.  

Foxconn accounted for approximately 41% of total revenues in the fourth quarter and 35% in 2011.  

Gross margin (excludes stock-based compensation charges and certain charges associated with acquisitions) came in at 31.0%, down from 36.3% in the previous quarter. The decline in gross margin was primarily due to product mix shift into lower margin products and lower utilization in factories. Utilization declined sequentially as the company completed long plant capacity additions and reduced inventory.

For 2011, revenues were $896.1 million, up 2% from 2010.  Revenues from mobile devices grew 6% offsetting a 4% decline in Networks and a 9% decline in Defense and Aerospace. Gross margin was 35.9%, down from 39.9% for 2010. Net income declined 75% year over year to $48.1 million.

TriQuint ended the quarter with cash and investments of $162.3 million, up from $147.2 million at the end of the previous quarter.

Going forward, TriQuint expects revenues between $210 million and $220 million in the first quarter of 2012. Management continues to see excellent growth opportunities in smartphones, tablets and other consumer devices with expanding RF content. Between 2010 and 2012, smartphones are expected to double in volume from about 300 million units to over 600 million.

Gross margin is projected between 30% and 31% as improved product mix will be largely offset by costs associated with the new Texas 6-inch line. Operating expenses are estimated around $62 million, including $4.5 million of litigation expense. EPS is forecasted around $0.01 and $0.03.

The weakness in margins and a significant decline in net income led to a 9.21% decline in share price in after-hours trading to close at $6.21.

Read the full analyst report on TQNT