Radio frequency semiconductor and systems supplier RF Micro (Nasdaq: RFMD) will be reporting its fiscal fourth quarter and year-end earnings tomorrow. Let's take a look at what may be in store for the major supplier of mobile communications components:

What analysts say:

  • Buy, sell, or waffle? Of the 24 analysts that give an investment opinion on RF Micro, 9 of them give a thumbs-up to buy, 11 say just hold on, and four say sell. RF Micro also holds a subpar, two-star stock rating (out of five stars) with more than 130 opinions in the Motley Fool CAPS community.
  • Revenues. On average, analysts predict quarterly sales to increase 13.2% over the same quarter last year to $255.6 million.
  • Earnings. Profits are predicted to rise 22% to $0.11 per share.

What management says:
There's both good news and bad news with RF Micro these days, according to the company's updated outlook, given at the end of March. The good news: CEO Bob Bruggeworth says "RFMD will report strong results this fiscal year, with revenue exceeding $1 billion along with significantly improved year-over-year financial performance." The bad news? The future doesn't look as bright. The company commented that "While we'll deliver a solid March quarter and fiscal year 2007, looking into the first quarter of fiscal 2008, we currently anticipate a slowdown in demand from a top tier customer that will impact our operating results." The customer responsible for this slowdown? Motorola (NYSE:MOT), which released its own warning about a slowdown in cell-phone sales a few days before RF Micro's forecast.

What management does:
The company has done a good job lately in keeping production costs down and its wafer yields up -- and gross margins reflect a positive trend. The focus on higher-margin products has also helped stabilize the natural decay in margins, as average selling prices for more commoditized products like low-end cellular phones continues to drop. Effective cost containment has also helped more dollars fall to the bottom line, a trend apparent in the improving operating and net margins:

Margins %

9/05

12/05

3/05

6/06

9/06

12/06

Gross

33.9

34.4

35.4

35.1

34.9

34.9

Operating

1.8

0.9

5.8

7.4

7.5

8.3

Net

(9.0)

(6.5)

2.1

3.9

0.8

5.2
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
The issue that has always plagued RF Micro is that it is a little tail being wagged by a few very big dogs. The big dogs in this case are cell-phone giants Nokia (NYSE:NOK), Motorola, Samsung and Sony Ericsson (a joint venture of Sony (NYSE:SNE) and Ericsson (NYSE:ERIC)). Since sales to these companies make up the majority of RF Micro's revenue, any ups or downs in the global market for cellular phones hit RF Micro proportionally. If all investors had to worry about was internal operations of the company, this would be a far less volatile stock. We'll see a refined outlook with the earnings release, so investors will learn then if further bad news is expected.

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Fool contributor Dave Mock is a sucker for Ding Dongs and Ho-Hos. He owns shares of Motorola. Dave is the author of The Qualcomm Equation. The Fool has a disclosure policy.