Can LTE Handsets Save Peregrine Semiconductor?

After losing share in iPhones, will Peregrine Semiconductor be able to bounce back?

May 20, 2014 at 8:00PM

Peregrine Semiconductor (NASDAQ:PSMI) has given investors a woeful time in the past year. The Apple component supplier's shares have been beaten down almost 40% due to stiff competition from peers like Skyworks Solutions (NASDAQ:SWKS) and TriQuint (NASDAQ:TQNT). Last year, Canaccord Genuity reported that Peregrine has lost share in Apple's iPhones, to whom it supplied the main antenna switch. Is there any hope for the company in the future?

Recent performance isn't good
Peregrine recently reported its first-quarter results, with revenue declining to $41.3 million from $46.6 million last year. The company also reported a non-GAAP loss for of $7.9 million, or $0.24 per share, in the first quarter. In comparison, Peregrine had reported a non-GAAP net income of $0.30 million last year. The loss of business from Apple has clearly dented the company's performance. There were some positive takeaways from the previous quarter, however.

A few positives
Peregrine's revenue came in much better than expected due to strength across a number of its businesses. The company is targeting growth in low-cost LTE handsets, and this has benefited it by growing its addressable market with healthy sales to China-based handset OEMs. 

Since carriers are rapidly rolling out LTE networks, with LTE advanced networks now live or being tested in over 50 markets, Peregrine is seeing opportunity here. According to management, the company is benefiting from the increasing radio complexity as it claims to be the first supplier capable of providing products which meet the higher requirements of LTE smartphones.

As a result, revenue from its mobile business came in well ahead of expectations. Better-than-expected demand for legacy design wins and orders for new designs helped Peregrine's top line in the last quarter. Going forward, it plans to directly engage with all the leading handset OEMs by demonstrating its solutions.

Peregrine Semiconductor demonstrated its Global One CMOS solution at the Mobile World Congress in February. The company has seen robust reception of this product after it conducted over 40 demonstrations of the CMOS power amplifier.

Since the Mobile World Congress, Peregrine has expanded the number of potential partners who have sampled Global One. The company seems to be making good progress on this platform and expects to begin generating revenue from the product in the second half of 2015.

In its non-handset or high-performance analog business, Peregrine also launched a record number of products in the first quarter. The company has tried to maintain a healthy pace of innovation in this segment to address healthy demand across a number of end markets. Peregrine saw better-than-expected revenue from this segment in the previous quarter. 

The TD-LTE rollout in China and several other markets could also improve the outlook for Peregrine's wireless infrastructure business going forward. The company's orders increased in the first quarter from its test and measurement customers. As the LTE roll out continues, Peregrine should continue gaining.

In addition, Peregrine also witnessed good demand for TV and set-top box products. As customers are looking for improved reliability, resilience, and repeatability that Peregrine's CMOS solutions offer, the company should see a good performance in this area as well. The company is investing heavily here to keep up the pace and is on track for another record year of product releases.

Competition is strong
All these moves no doubt look interesting, but they don't make Peregrine a company worth buying right now. It is currently running in a loss, and its earnings are expected to decline in the short term. Moreover, competitors such as RF Micro and Skyworks can hurt it more.

Like Peregrine, Skyworks is also looking to benefit from the LTE handset market. Skyworks has recently launched a 802.11ac Wi-Fi chip that can support several connected applications including set-top boxes, 4G LTE services, and 4K televisions. 

Meanwhile, TriQuint is ready to grab a bigger pie of the market as it is merging with RF Micro. RF Micro has a good position in the Chinese market as it supplies its chips to Samsung, which is the leading smartphone company in China. Also, TriQuint has made its product portfolio stronger by introducing 36 new products in the first quarter. Since TriQuint is looking to introduce more new products going forward and reduce its legacy offerings, it could gain more market share in the industry. 

Bottom line
Although Peregrine has made some good moves, the company is still reeling under the effects of its Apple loss. Investors should stay away from this company until and unless it shows some meaningful signs of a turnaround.

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Amal Singh has no position in any stocks mentioned. The Motley Fool owns shares of TriQuint Semiconductor. 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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