RF Micro Devices (Ticker: RFMD)

RF Micro Devices (Ticker RFMD), a 2% holding, reported September financial results after the close yesterday. The company beat top and bottom line, and provided guidance for the December quarter above street expectations.

The key comment in the conference call, in my opinion, was said by the CEO:
"In fiscal 2011, we continue to anticipate annual revenue growth supporting record operating income and double-digit growth in earnings per share. In fiscal 2012, which begins in April, we forecast sequential growth will accelerate, driving expanding margins and continued improvement in earnings and cash flow."

Translation - Improving ROIC (the primary driver of stock performance, in my view) + Growth.

Reasons for likely improving ROIC:
(1) Focusing on areas of leadership and RF components and compound semiconductors.
(2) Fundamentally altered the capital intensity of the business through IP, intellectual property, and technology leadership. Can now drive significantly higher revenue with less capital investment. (Capacity utilization is roughly 75%)
(3) Improved execution

The drivers of the accelerating growth include:
(1) Strength of new product launches
(2) Customer diversification efforts (Nokia down to ~39% of revenue)
(3) Long-term secular growth trends in our end markets

Bottom Line - This outlook should set-up the stock for a sustained run because the stock is trading under 10x the consensus estimate for C2011 non-GAPP EPS.


Transcript from call.

Everyone should do their own research on an investment idea before buying/ selling.