Tuesday, December 14, 2004

Triquint: the next semi to fall

TQNT became the next semi company to lower guidance for Dec qtr during its mid qtr call today. Dec guidance is now 18% to 19% sequential decline in revenues versus prior expectation of 11% to 15% decline. TQNT blamed wireless and optoelectronics softness for the lowered guidance. TQNT expects flat revenue in 2005 with second half accouting growth. Q1'05 visibility looks weaker for handsets which could have a negative affect on vendors like STM, TXN, AGR, RFMD, SWKS, SLAB.

TQNT which originally was a provider of components for handsets entered into optoelectronics business through acquisition (another one of those buying growth schemes). The issue with TQNT and many tech/semi companies is that they refuse to accept that their technology portfolio is becoming extinct and instead of right-sizing managements opts for self "full-employment" by attempting to buy growth. I have highlighted COMS and AMCC in the past as companies that are going through similar situations. So what is wrong with aTQNT technology you might ask? TQNT makes various components for handsets and those components are becoming obsolete thanks to QCOM incorporating those functions into its chipsets (for CDMA). TQNT originally did not participate in the GSM market, and revenues from GSM are immaterial currently accounting for 2% market share. TQNT's optoelectronic business (the one they bought for growth from AGR) has been losing money and has gone through massive layoffs, remains to be seen when that business reutrns to profitability. The remaining revenue come from wireless infrastructure (wlan chips and ICs for base stations) and we all know how competitive that market is. TQNT management believes they are positioned to make inroads into GSM and EDGE components. Yea from a small base its pretty easy to make inroads but will they have enough traction to make a dent in their operational issues.

Basically, it boils down to TQNT not being able to spend enough to keep up with market needs and not having enough scale to do anything well. On top of that add the inventory and end demand situations and you got a serious mess in your hands.

Oh yea TQNT announced they spent $3M to buy another company today but atleast its a profitable company.


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