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Optical components

TriQuint Ponders Optics Options

As TriQuint Semiconductor Inc. (Nasdaq: TQNT) officials try to wring profits from their optoelectronics business, one option -- the sale of the Breinigsville, Pa., manufacturing facility -- has been scuttled for now.

Nearby Kutztown University was interested in buying the building and turning it into an engineering school while renting space to TriQuint, according to the Morning Call of Allentown, Pa. The deal would have worked because TriQuint is using so little of the facility.

But during last week's earnings call with analysts, TriQuint officials said the deal fell through on Oct. 18. Now it appears TriQuint will have to write off some of the building's $22.3 million value, taking a non-cash loss in its fourth-quarter earnings.

There's still hope for a sale, though. "I believe they have another buyer they're talking to," says Sandy Harrison, an analyst with Pacific Growth Equities Inc..

The building was acquired along with Agere Systems Inc.'s (NYSE: AGR.A) optoelectronics business, a deal that closed in January 2003 (see TriQuint to Acquire Agere's Optics). Since the acquisition, TriQuint has struggled to get the business into profitable shape, and last quarter company officials said they're looking into "strategic alternatives," which could include sharing the manufacturing facility with others or selling the entire optoelectronics business.

"That business is currently under a microscope," CEO Ralph Quinsey said on the conference call.

TriQuint still believes in the optoelectronics business. The company has been developing higher-margin products, such as XFP transceiver modules for 10-Gbit/s ports, and it has been trying to shed some of the less promising pieces of the business (see TriQuint Intros DWDM, XFP and TriQuint Talking Deals at OFC).

But the industry has been slow to recover. Optoelectronics represented 12 percent of revenues -- roughly $11 million -- during the quarter ended in September. That's even with the previous quarter, and it's likely to sit at the same level for the December quarter, Quinsey said. All the while, optoelectronics continues to lose money. "That business is killing them from a profitability standpoint," Harrison says.

New products such as the XFP modules "will not be enough to offset the losses we expect [from optics] in 2005 without further action," Quinsey said. "The optoelectronics market continues to be highly competitive, with most companies operating at a loss."

For its third quarter, which ended Sept. 30, TriQuint reported losses of $4.1 million, or 3 cents per share, on revenues of $89.7 million, compared with profits of $287,000, zero cents per share, on revenues of $92.6 million for the quarter that ended in June.

For the third quarter last year, TriQuint reported losses of $5.8 million, 4 cents per share, on revenues of $78.8 million.

— Craig Matsumoto, Senior Editor, Light Reading




For more info on the state of industry financials, check out the coming Light Reading Live! event:

deauxfaux 12/5/2012 | 1:09:06 AM
re: TriQuint Ponders Optics Options You bought a perpetual claim on negative cash flow for $40M. This was not a very smart thing to do. Here are 5 reasons

1) BVille only makes expensive parts in a low cost market. I don't know how to break it to you, but XFP will soon be priced at a modest premium over SFP. If you can't make money on SFP, you won't be better off with XFP.
2)The MRC requires more engineers to keep things running than operators. Remember, all of this equipment was custom designed by Pilitsis's guys back in the mid 90's, deployed during the bubble, and has been obsolete for years.
3)It cost a lot less to hire chinese assemblers to do the work of expensive, slow, custom designed robots which need constant attention. The CENIX (Ex LU MRC zealots) guys blew a wad of KP $$$$$, failed and proved this point conclusively
4)The majority of the smart guys left PA years ago when they saw the handwriting on the wall. Even the "Director Duo" left for greener pastures a year or 2 ago
5)The only people left at BVille won't ever quit because they can't afford the downpayments for homes in SV and/or they are close to retirement. They won't take the risks necessary to compete

Lights out gracie
Dr.Q 12/5/2012 | 1:09:03 AM
re: TriQuint Ponders Optics Options The only other clear option I see for a sale would be to a Big Box retailer like Walmart, who would use the enormous floor space. Trouble is, there's already a new Walmart just 5 miles up the road from B'ville facility.

- Dr. Q
Vent 12/5/2012 | 1:09:02 AM
re: TriQuint Ponders Optics Options This is a problem that all the companies that have bought ex teco sytem companies opto plants have to face.
Bookham bought nortel's and MARCONI'S and have virtually shut down the assembly operation at Paignton UK and are moving productionto China.
Avanex have the same problems at the ex Alcatel optronics plant at Nozay france and don't know yet what to do.
Nobody is making money, still need more consolidation or one or more of these companies to shutdown

vent
deauxfaux 12/5/2012 | 1:09:01 AM
re: TriQuint Ponders Optics Options Maybe Kmart.....BLUE LIGHT SPECIAL IN POD3 on Andy Q's white elephant MBE

DarkWriting 12/5/2012 | 1:08:59 AM
re: TriQuint Ponders Optics Options I would be willing to bet that both political parties have promised to have the US government purchase the building if they win the election. After all, we are talking about a "swing state" here. Of course, that assumes Triquint has enough stick to deliver some jobs/votes. Watch and learn.

DW
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