M/A-COM Technology Up 4.3% In Early Trading Post-IPO
March 15 2012 - 11:11AM
Dow Jones News
Semiconductor company M/A-COM Technology Solutions Holdings Inc.
(MTSI) made modest trading gains during its first day as a public
company Thursday.
The company's stock opened at $19.10 a share on the Nasdaq,
essentially flat from its initial public offering price of $19, but
rose from there. It hit a high of $21.10 before moving lower,
changing hands recently at 19.80, up 4.3%. It sold 6 million shares
at the high end of its expected $17-to-$19 range.
Based in Lowell, Mass., M/A-COM specializes in analog
semiconductor chips for use in products ranging from automobile
navigation systems to magnetic resonance imaging systems. It
focuses on three markets: telecom; aerospace and defense; and what
it describes as multimarket, which includes automotive and
scientific applications.
M/A-COM says its engineers collaborate with customers as they
develop products so that it can customize its chips for their needs
and become their sole source on design wins. It has 155 new
products in development that it believes will increase revenue
growth and gross margin.
Many of its existing products have long lifecycles, ranging from
five to 10 years, and some of its products have been shipping for
more than 20 years. Its largest customers include Alcatel-Lucent SA
(ALU), Cisco Systems Inc. (CSCO), Rockwell Collins Ins. (COL) and
Ford Motor Co. (F)
The company says demand for its products is driven by the growth
of mobile Internet devices, cloud computing and streaming video
that strain existing network capacity, as well as the growth in
military applications. A greater need for real-time information,
sensing and imaging in other markets such as automotive and
scientific is also increasing demand.
M/A-COM booked revenue of $310 million in fiscal 2011--its
fiscal year ends in September--up 19% from fiscal 2010 as it
shipped more products, and recorded a net loss of $1 million
compared to net income of $7 million. In the three months that
ended December, revenue decreased 2.5% to $73 million, and it
recorded net income of $22 million compared with $8 million in the
same period of 2010. The revenue decline was due primarily to a
slowdown in capital spending by telecom companies and the effect of
shipment delays and order cancellations after its contract
manufacturer in Thailand flooded.
Like many semiconductor designers, the company operates in a
cyclical industry that is exposed to price erosion, and the
constant need to develop new products to replace ones that are
generating less profit. It is in a fiercely competitive industry,
with Hittite Microwave Corp. (HITT) its rival across all three of
its primary markets.
The company operates its own fabrication factory in
Massachusetts--a domestic foundry is often a requirement to be a
supplier in the aerospace and defense industry--which it says gives
it better control over supply and quality of its products. It also
contracts with third-party foundries during periods of high demand,
which it says gives it flexibility to scale up without the cost of
operating more facilities. Still, operating even the one foundry
can drag on margins due to fixed expenses during periods of lower
customer demand, the company warns.
Barclays Capital, J.P. Morgan Chase & Co. (JPM) and
Jefferies Group Inc. (JEF) managed M/A-COM's offering.
-By Lynn Cowan; 202-257-2740; lynn.cowan@dowjones.com