CEO outlines MCRL's competitive advantages:consistency,50-50 std analog/comm
Raymond Zinn, Micrel Inc.
RAYMOND ZINN is President & CEO of Micrel Inc.
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TWST: What do you consider to be your competitive advantages in your sector of the market?
Mr. Zinn: We believe that Micrel (Nasdaq:MCRL) combines the best of two worlds. Analog semiconductors have always been deemed as one of the safe harbors for the investor because analog products tend to yield higher gross margins, longer product lives, less pricing pressure, and they tend to have more revenue stability. If you look at the analog business as a standalone, it's very stable, grows reasonably and has good gross margins. I would say that those are its hallmark features. The communication business, the other leg of Micrel's strategy — because we also have both analog as well as a communication business — has much faster growth, almost double the growth of the analog sector with equivalent or better margins than analog. As long as the communication market continues to grow, then I believe it will continue to have good growth opportunity for our company, as well as a gross margin that matches our good analog gross margin. So we say that Micrel bridges the best of both worlds, analog and communications. We have roughly 46% of our sales going into the communication-type products, and then the other 54% going into the standard analog markets. We believe this is a good mix. This ratio in communications may move up a little bit, but we think we'll stay roughly half analog and half communications because one thing that analog does is it has a lot more customers, a wider diversity of markets. So therefore, it has less volatility to it, whereas the communication market has fewer customers and a little more volatility. So by combining both analog and communications, we still get the stability of analog, but with the growth opportunities of communications.
TWST: In summing up, what two or three reasons would you give potential long-term investors for investing in Micrel?
Mr. Zinn: Consistency, consistency and consistency — those are the three reasons. We're the most consistent semiconductor company, I believe, in the industry. We have been recently selected by the S&P 400 mid-cap, and that says something about the company's consistency and the strength of a stock price. We've also been recognized by Forbes, Fortune and Business Week as one of the top 100 companies in the United States. We were selected recently by the San Jose Mercury News as one of their top 150. I guess the company has all the attributes of the kind of stock that you'd want to own and hold onto. We're not a trading stock. We're just so consistent; we've had 24 consecutive quarters of gross margin expansion. We've had 16 consecutive quarters of revenue growth. And we've had three consecutive quarters of double-digit revenue growth. So if you combine all that, we have probably one of the best fundamental track records of any semiconductor company in our space, and probably one of the best track records of any stock currently traded on the stock exchange. We've been public for five years. We've only missed the analyst estimates one quarter out of the entire time that we've been public. So out of the past 22 quarters, we have met or exceeded Street estimates 21 times, and that's pretty good. |
