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Intersil: A billion-dollar analogue contender?

Posted: 12 Jul 2010     Print Version  Bookmark and Share

Keywords:Intersil analogue market  power management  mixed-signal product  ADC  LED 

State of analogue
With the exception of Techwell, the other acquisitions are not expected to contribute to Intersil's top-line for some time. The acquired companies, not including Techwell, contributed less than Rs.9.34 crore ($2 million) in sales for Intersil's Q1 10, Bell said during a recent analysts' event.

And for that matter, many of those acquired firms are barely shipping product, thereby requiring Intersil to invest in those players. "Our primary concern remains Intersil's ability to control spending within its guided range—which has not transpired over successive quarters—especially as a new layer of expenses is added (from the Techwell deal)," Freedman said.

On a positive note, Intersil is back on a steep growth curve. Net revenues for Q1 10 were Rs.884.46 crore ($189.4 million), a 60 per cent increase from Rs.551.97 crore ($118.2 million) in Q1 09 and a 7 per cent increase from Rs.829.83 crore ($177.7 million) in Q4 09. Net income was Rs.129.35 crore ($27.7 million), or Rs.10.27 (22 cents) per diluted share, compared with Rs.11.21 crore ($2.4 million), or Rs.0.93 (2 cents) per diluted share in the same quarter last year, and net income of Rs.82.66 crore ($17.7 million), or Rs.6.54 (14 cents) per diluted share, in the fourth quarter of 2009.

Intersil also raised its outlook for Q2. Revenues are now expected to be in the range of Rs.999.34 crore ($214 million) to Rs.1,036.70 crore ($222 million). Previously, revenues were expected to be in the range of Rs.933.96 crore ($200 million) to Rs.971.32 crore ($208 million).

Overall, the current analogue cycle is robust, but many wonder just how long the party will last. "People underestimated the strength of the recovery in electronics. It's broad-based," Bell said. "2010 will be a huge year for growth. Will 2011 be less growth? It pretty much has to be. But is it going to be down in the 4 to 5 per cent range? No I doubt that."

Right now, there are some mixed signals in the market. "Maybe there is a little inventory building (in the channels). Frankly, in the PC industry, we had a little bit of an inventory correction that actually happened in the last couple of months," he said.

There are still shortages and extended lead times. "It's across the board. You've had supply constraints in the front-end, that is, in the wafer foundries, which are up to their eyeballs (in fab utilisation). TSMC, UMC and all those guys are running at full capacity and then some. In the backend, there have been some challenges," he said. "Our lead times at Intersil have remained short through the whole cycle. Most other companies have had shortages."

Going forward, "I think (the shortages) will wane or gradually go away in the second half. There is a lot of investment mitigating those shortages," he said. "I'm pretty optimistic about having a good second half. But the quarter-over-quarter growth rates (will slow)."

In the meantime, Intersil is putting the pieces in place to become the next $1 billion player in analogue via acquisition and by expanding organically. Intersil will also win by being more agile than its rivals, Bell said. But what really makes Intersil slightly different than its peers is its fab-lite strategy.


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