fiberoptics are being sold...
jdsu, sdli, glw, cien,....
rfmd got a nice haircut.
hlit getting sold....
bk or not,,,these things are filling some serious gaps....
nice article on ANAD and it's being shelled for 10 points...
URL: cbs.marketwatch.com
Recipe for success
Investors eating up Anadigics shares
By Janet Haney, CBS MarketWatch
Last Update: 3:06 PM ET Mar 14, 2000
Market Snapshot
Research Alerts
WARREN, N.J. (CBS.MW) -- Take one hot chip sector, add efficient manufacturing,
mix in the explosive wireless and fiber-optic markets and what do you get? Anadigics, of
course.
The stock's up 243 percent since the first of the year, and analysts are talking up the
maker of radio-frequency integrated circuits.
"I think the story is coming around,"
said Harsh Kumar, an analyst at Roth
Capital Partners. "They spent almost
the entire last year, 'under the covers,'
building up a very strong product
portfolio, very strong technological
portfolio and a very strong position
with respect to the cost structure."
Since January the wraps have come off the stock.
Shares of the Warren, N.J., company have risen from 31 3/4 on January 3 to above 100.
The stock's split 3-for-2 in the same period.
That time spent under wraps, and encouraged by a surge in demand for wireless and
fiber-optic telecommunications, caused the stock to burst once investors digested the
Anadigics story.
One of the stand outs for Anadigics (ANAD: news, msgs) is its
6-inch gallium arsenide (GaAs) wafers (a material used in chip
making). The size of the platform dictates the number of
components put on the wafer, Anadigics said. That in turn lowers
the cost structure and increases capacity. Additionally, gallium
arsenide is used as a base material for chips and is faster than
silicon.
"Anadigics is really the only one with a 6-inch gallium arsenide
fab," Kumar said. "That translates to roughly a 25 to 30 percent
cost advantage for manufacturing of products."
The 6-inch wafers are then used in making chips that go into wireless phones, cable
modems, digital cable set-top boxes and fiber boxes.
The analyst believes that as business comes through to Anadigics and as capacity ramps
up, the company will be the clear leader with respect to low cost manufacturing. He said
the company is currently running at about 65 to 70 percent capacity.
"They have clearly, in my view, at least a year, year and a half lead as far as cost structure
goes, relative to their competitors," Kumar added.
Bami Bastani, chief executive officer of Anadigics since October 1998, couldn?t agree
more.
"I believe the reason why there has been such high interest in Anadigics ... is that we are
such a strong player in both broadband and wireless," Bastani told
CBS.MarketWatch.com in a recent interview.
He said his company is the only one currently shipping 6-inch products.
Strategic weapon
Hans Mosesmann, an analyst at Prudential Securities, views Anadigics move to 6-inch
GaAs wafers as a strategic weapon over the next couple of years and agrees that the
company has at least a one-year lead on the competition. He said other companies using
analog GaAs in fabs are producing 4-inch wafers.
"They [Anadigics] can either gain market share, or they can have gross margins that are
higher than anyone else in the business," he said. "They have lots of opportunities to go
after markets that they couldn?t go after before."
Anadigics' main competitors include: RF Micro Devices (RFMD:
news, msgs), Conexant Systems (CNXT: news, msgs) and TriQuint
Semiconductor (TQNT: news, msgs).
Bastani pointed out that the company is driven primarily by the
wireless and cable segments, which he said grew 52 percent year
over year. Tech heavyweight Ericsson (ERICY: news, msgs)
makes up the largest percentage of sales for Anadigics, with Motorola pulling in at second
place. Anadigics began shipping RF (radio frequency) switches for use in the telecomm
equipment maker?s (MOT: news, msgs) CDMA handsets this quarter, the CEO added.
Risk factor
Stacie Cowell, lead manager at Invesco Small Company Growth Fund, said the largest
risk for Anadigics would be a general slowdown in sales of wireless handsets or in digital
set-top boxes. But she said the markets the company is addressing are growing rapidly.
Cowell holds about 300,000 shares of Anadigics in her fund, with total assets under
management of about $2 billion.
Meanwhile, Anadigics also is taking its RF experience and applying it into power
amplifiers and control devices, the chief executive said. Bastani added that with its cable
business, the company has better than 50 percent market share in RF.
"What makes Anadigics stand out from the crowd, we have executed very smoothly to
our wireless strategy . . ." Bastani added. A key component of that strategy is adding a
transistor to its product portfolio that boosts RF power. The device is called a
hetero-junction bipolar transistor, or HBT for short.
The company is testing a HBT power amplifier in the first half of
2000, with plans to go into production in second half of the year.
In addition, Anadigics expects to introduce new products for the high-speed fiber market
during the second half of the year. Fiber makes up about 10 to 15 percent of Anadigics
sales, based on the quarter.
The bulk of all the company's manufacturing is done in its hometown of Warren, N.J.
Anadigics employs 600 people.
Poised for comfort
As investors cheer on the stock, Wall Street analysts have been watching the numbers.
Analysts surveyed by First Call expect the company to earn 14 cents in its first quarter.
"We feel very comfortable with the analysts' estimates out there," Bastani said. "Our
guidance has been that first quarter has single digit sequential growth over fourth quarter."
Mosesmann said since wireless is one of the strongest end markets today and Anadigics is
gaining market share within that market. He believes the stock is going to continue to do
very well. "I would recommend it from the perspective of buying the stock even at these
levels," he said.
"Of all the four players in the market place today in the gallium arsenide plays, this is
probably, in my view, the best pure play for the wireless, cable segment," Roth Capital
Partners' Kumar concluded.
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