Interview with SMDI CEO
Stanford Microdevices CEO Robert Van Buskirk
by John J. Henry of Team StreetSideInvestor
streetsideinvestor.com
Good Afternoon, this is John J. Henry for StreetSideInvestor’s Executive’s Corner. This morning, we’re speaking to Robert Van Buskirk, President and CEO of Stanford Microdevices (NASDAQ:SMDI). Stanford Microdevices is a designer and supplier of high performance radio frequency components for communications equipment, used primarily in wireless equipment to enable and enhance voice and data signals. The company had it's Initial Public Offering on May 25th, 2000 and their stock has been active ever since.
StreetSideInvestor:
Could you please comment on the 4 new high gain broadband amplifiers that were introduced on June 27th, 2000?
Mr. Van Buskirk:
This is an extension of a family of amplifiers that we have been marketing based on the Silicon Germanium technology that we feature. We have a series of these broadband amplifiers with different levels of linearity and gain that are used as building block devices primarily in wireless base stations used for cellular and PCS type applications. So each of these four new products have a differing gain and linearity characteristic and is an extension of a family of silicon germanium based products that we already market.
StreetSideInvestor:
When do you feel that Stanford Microdevices will be able to record positive earnings?
Mr. Van Buskirk:
Well the analysts that initiated coverage on the company in the recent past generally anticipate Stanford Microdevices to have positive earnings for the year 2000. The range is anywhere from breaking even from an EPS standpoint and it goes as high as about 4 cents a share. I think the consensus would around 2 cents per share positive earnings for the year and we are comfortable with this level of estimated earnings. Actually in Q1 of this year we were already positive at 1 cent, or a penny per share after adjusting for some special charges.
StreetSideInvestor:
What gives Stanford Microdevices a competitive edge over the competition such as Conexant Systems?
Mr. Van Buskirk:
It is interesting that you pick Conexant Systems because we do not see ourselves as directly competitive with Conexant as we would perhaps see with other companies and that leads into what gives us our edge. We have a focus that is actually quite different from many of the well-known RF components companies. So companies like Conexant or RF Micro Devices are focused very heavily on the handset or the terminal side of wireless communications. We focus exclusively on the infrastructure or what some people like to call the core of wireless systems. So one of the reasons that we see ourselves having a competitive edge is due to the focus we have on the infrastructure marketplace. When we say the infrastructure we are talking about the equipment that goes into the base stations that basically power these wireless networks. We do have some initiatives underway to get into some of the advanced wireline applications but again we will be in the core or infrastructure side of things not in the terminal or consumer oriented type of product.. Besides focus as a competitive advantage we are also a fabless company; in our operating model, we don’t own a semiconductor wafer fab. This gives us the ability to move to new technologies faster than our competition and it gives us the ability to be flexible and versatile when we apply the technology that we need to a particular product. Another area is that we have a broad range of technology, in part due to the fabless operating model. We have in production today: Silicon Germanium, Gallium Arsenide, Indium Gallium Phosphide, and we are starting some preliminary work on LDMOS, which is a silicon technology. So we have a wide range of technology which is broader than most of our competition. The last competitive advantage that I will mention is in our channels to market. We have a very strong and balanced set of channels including: direct channels to market, distribution channels, and also a private label agreement with a company by the name of Minicircuits.
StreetSideInvestor:
I am glad that you mentioned Minicircuits because my next question regards that company. Minicircuits Laboratories accounted for 40% of your total revenues in 1999. Should there be any concerns in investor's minds that one company accounts for such a large percentage of Stanford Microdevice's revenues?
Mr. Van Buskirk:
Well I will start answering this question saying that our estimate for 2000 has Minicircuits accounting for 20-25% of our total revenues. Now that decline is not due to a decline in dollar for dollar, year over year, but is due to the fact the other two channels, distribution and direct sales, are growing at a faster rate than Minicircuits. They are still an important channel of ours and it has been a legacy market channel for us for many years. We still see it as an efficient and viable channel to market but it is coming down as a percentage again due to the faster growth in the other two channels. We see that decline to continue into 2001, again not due to lack of executions of product through the channel but because we have a high expectations of growth in the other two channels. With that as a background, Minicircuits has been a substantial and very solid and very profitable channel for us for many years. If I could speak to an investor directly I would say that if you are still uncomfortable with the revenue percentages that I have already mentioned I would try to allay some of those concerns by saying it is a very efficient channel and we continue to execute on it well. We do not see Minicircuits as a weakness; we see it as a strength.
StreetSideInvestor:
In 1999 Stanford Microdevices sales growth grew around 120%. Do you think that the company can continue to grow at this pace?
Mr. Van Buskirk:
Again returning to the analysts' projections, I think that a consensus would have us growing at about 70-80% for the year over year 2000 versus 1999. Actually I believe that the analysts’ consensus also estimates a continued growth of 70-80% into 2001. So, 1999 was a break out year for Stanford Microdevices. We made some investments in technology access, in product development, in further strengthening internal operations, and also working with our channel partners in a very effective marketing and sales program. 1999 was a great year for us when compared to 1998 in terms of revenue growth, but we see 2000 at 70-80% still being a very substantial level of growth and we hope to continue that growth into 2001. I believe shareholders should look at this level of projected growth positively.
StreetSideInvestor:
One last question, Is there anything else that you would like to tell our readers?
Mr. Van Buskirk:
I would say that in general it is a very good time to be a components supplier into the communications equipment marketplace. Our addressable market that we see this year, and again this is addressable market only for the infrastructure RF components, is somewhere in the area of $1.5 billion. We see that by 2003 more than doubling and, in my experience in this industry, most of the wireless and wireline estimates for equipment and components have actually been under-estimated traditionally. So there is a lot of value migrating to the component level. It is a very energetic and growing marketplace in general and we see an excellent opportunity for investors to participate in the growth of wireless and high speed wireline networks and markets at the component level.
As a Team StreetSideInvestor member, John J. Henry does not own or short individual stocks. The information in this column under no circumstances serves as a recommendation to buy or sell stocks. |
