Can Anadigics Rebound After a Bad Quarter?

Semiconductor solutions provider Anadigics (NAS: ANAD) posted weak second-quarter results, hurt by a drop in shipments. The company failed to meet analysts' revenue forecasts and swung to a quarterly loss; its shares plunged 9.5%.

Into the numbers
Revenue for the quarter fell to $35.6 million from $51.7 million a year ago, down 31.1% on a year-on-year basis. Shipments to BlackBerry maker Research In Motion (NAS: RIMM) fell by almost $10 million from the previous quarter, leading to a drop in the top line. The sharp decline in overall revenue resulted in an operating loss of $12.1 million, up from $1.3 million last year. The company reported a loss of $13.1 million, compared with a profit of $0.8 million a year ago.

The RIM effect
Anadigics' problems compounded when RIM shifted to a different chipset vendor. The company's products were not compatible with the new chipsets, which led to a fall in shipments. Also, Anadigics could not meet the demand of power amplifiers, leading to supply delays that finally resulted in RIM backing out. Last year, RIM had accounted for almost a third of the company's revenue. With such a huge loss of revenue from one of its most important customers, Anadigics may find the going tough.

Plans in the pipeline
Anadigics used to be the primary provider of power amplifiers to RIM, but its market has been locked in by Skyworks Solutions (NAS: SWKS) and RF Micro Devices (NAS: RFMD) . To counter this, the company plans to improve capacity at its plant next year to win back one of its most prized customers. Although it sounds fascinating, this will result in increased costs. With RIM going through a rough phase, Anadigics' prospects do not look encouraging.

Industry slowdown
However, there are similar concerns plaguing other industry players. Peers such as Trident Microsystems (NAS: TRID) and TriQuint Semiconductor (NAS: TQNT) have either reported losses or reported tepid growth in their respective quarterly earnings. Anadigics seems to be worst hit because of the loss of revenue from RIM.

Fool's take
Anadigics expects its new power amplifiers that go into production next year to propel the company's addressable market to $3 billion. However, with competitors at its tail, Anadigics appears to be too optimistic about its prospects. This stock has been going downhill, and I don't see a bright future.

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At the time thisarticle was published Harsh Chauhan doesn't own any shares in the companies mentioned in this article.The Motley Fool owns shares of TriQuint Semiconductor and Research In Motion. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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