Zacks_Analysts' Blog : TriQuint Slashes 3Q Guidance - Analyst Blog

TriQuint Semiconductor, Inc. (TQNT) recently revised its outlook for the third quarter of 2011. The company now expects revenues between $210 million and $215 million, down from the previous guidance range of $225 million to $235 million.

Excluding one-time items and stock-based compensation expenses, gross margin is projected in the range of 35%–37%. Operating expenses (including litigation expenses) are estimated around $60 million. TriQuint anticipates net income per share to range between $0.09 and $0.11, down from the earlier estimate of $0.16 to $0.18.

Management stated that the reduction in expected revenue and profitability for the third quarter is primarily due to decreased demand from the company’s largest customer, weakness in the communications infrastructure market and softening demand from China. Gross margin is expected to decline sequentially due to product mix and costs associated with ramping new products. However, TriQuint expects to return to strong sequential revenue growth in the fourth quarter of 2011.

Earlier, TriQuint Semiconductor reported disappointing results for 2Q11, falling short of the Zacks Consensus Estimate by a penny.

Business in the second quarter was impacted by macroeconomic weakness, including the tsunami in Japan, which largely affected the networking business, inventory overhang in Asia (primarily in the optical market) and a steeper decline in the 2G business than management’s expectation due to GaAs and BAW supply constraints last year. TriQuint shifted capacity as well as focus from 2G products to 3G and LTE, leading to a decline in GSM and legacy CDMA revenue. We believe this has resulted in loss of share most notably at Samsung.

Earnings estimates for 2011 have declined by 18 cents in the last sixty days. We expect further downward revisions in the consensus earnings estimate to incorporate the reduction in guidance as provided by the company.

We have a neutral recommendation on TriQuint. However, we have a Zacks #4 Rank on the stock, which translates into a short-term Sell rating, based on the near-term pressure arising from the weak guidance.