There are a number of ways to characterize slowing growth, but no matter how good the explanation, the result is often the same. The stock of radio frequency semiconductor supplier RF Micro (Nasdaq: RFMD) was slammed Friday, finishing 25% lower, after the company warned that its third-quarter financials won't live up to expectations.
RF Micro's previous foray into the land of reduced outlook came courtesy of Motorola's (NYSE: MOT) sales decline early in 2007, when the manufacturer failed to follow the hit RAZR with a similarly attractive offering. This time, RF Micro didn't cite a single customer for the shortfall, but blamed soft demand late in the quarter from Asian customers.
The company believes the reduced demand will lead it to report only $268 million in revenue for the quarter. But this number is boosted because of the recent acquisition of Sirenza Microdevices -- on a comparable basis, RF Micro sees sales of $254 million, which is slightly below last quarter's figure.
What's worse is the company anticipates a sequential decline in revenue next quarter as well. Because RF Micro also said that the sales decline was influenced by top-tier customers that utilize inventory hubs, it looks like device makers overbuilt in anticipation of a bigger selling season.
So while hit products such as Apple's (Nasdaq: AAPL) iPhone and Research In Motion (Nasdaq: RIMM) BlackBerry are still expected to show strong sales in the holiday period, the environment for wireless devices as a whole may not be as robust. Top device maker Nokia (NYSE: NOK) has had a strong year as well, but investors will just have to wait to see how market share of the top suppliers stacks up.
The service provider side of the telecommunications business may be showing signs of cracks as well. With AT&T (NYSE: T) CEO Randall Stephenson citing weakness in some areas of his company's consumer business last week, RF Micro's warning probably shouldn't come as much of a surprise. But Verizon Communications (NYSE: VZ) Chief Operating Officer Dennis Strigl says he sees his company's business doing just fine and can't attribute any issues to larger economic conditions.
RF Micro is usually the first to be taken out during down wireless cycles. We'll have to see if all the various players suffer equally at the hands of weak consumer demand, or whether it's a convenient scapegoat for lost market share.
