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ANADIGICS, Inc. (NASDAQ:ANAD)

Q2 2011 Earnings Call

August 4, 2011 8:30 AM ET

Executives

Thomas Shields – COO and CFO

Ronald Michels – CEO

Analysts

Harsh Kumar – Morgan Keegan & Co., Inc.

Dale Pfau – Cantor Fitzgerald Securities

Quinn Bolton – Needham & Co. LLC

Edward Snyder – Charter Equity Research

Paul McWilliams – Next Inning Technology Research

Todd Koffman – Raymond James & Associates

Aalok Shah – D. A. Davidson & Co.

Operator

Good morning. My name is Crystal and I will be your conference operator today. At this time, I would like to welcome everyone to the ANADIGICS Second Quarter’s Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions)

Thank you. Mr. Tom Shields, COO and CFO of ANADIGICS, you may begin.

Thomas Shields

Thank you, operator. Good morning, everyone, and welcome to the ANADIGICS second quarter 2011 earnings conference call.

Before we get started, please remember, any comments made in this call by management, as part of prepared remarks or in response to your questions, may contain forward-looking information. Such information is subject to risks and uncertainties as described in this morning’s press release and in the company’s various filings with the SEC.

I would now like to turn the call over to Ron Michels, CEO, for his opening remarks.

Ronald Michels

Thank you, Tom, and good morning, everyone. Thank you for joining us this morning. I would like to start this morning by providing a high-level overview of our revenue for the second quarter and then provide an update on our business activities since our last earnings call – our last conference earnings call.

This morning, we reported revenue for the second quarter of $35.6 million, which was sequentially down 18.1% but was in line with our previous range of guidance. As expected, wireless revenue declined sequentially by $10.6 million with the majority of this decline with RIM. Partially offsetting wireless in the quarter was an expected sequential increase in broadband revenue of $2.7 million attributing to strong shipments in cable infrastructure.

In regards to our third quarter outlook, I mentioned in our last earnings call that we – our hope was for revenue in the second quarter to be the trough in revenue for the company, but that I couldn’t be certain. Unfortunately, that uncertainty still exists with us today. The shift in our wireless customer mix, particularly to Korea and China, has led to very short order lead times.

Additionally, there is greater use of customers of hub arrangements – that’s consigned inventory are making it even more difficult to accurately forecast revenues. In light of these factors, although we continue to target our revenue plans on the basis of the second quarter being the revenue trough, we’ve decided to suspend our quarterly financial guidance. But let me repeat, we continue to target our revenue plans on the basis of the second quarter being the revenue trough.

As mentioned last quarter, achieving a competitive cost structure and aligning our expenses to the current revenue level are extremely important and we’ve made significant progress in this regard during the quarter and Tom will address these areas in more detail. I will focus my comments on the progress that we’ve achieved related to customers, reference design partnerships, new product development, as well as process development.

So let me begin with my top priority which is customers. During this last quarter I spent a great deal of time with all of our top customers and I would like to share some of the key takeaways as well as our company’s progress in each.

Starting with Samsung, I am pleased to report that we’ve received the top PA supplier rating from Samsung for our power amplifiers, and that’s based on our delivery, quality, technology, and responsiveness. We have three times the number of parts qualified with Samsung compared to a year ago, which I believe demonstrates the strength of our relationship and will prove to be a leading indicator of future engagements.

As further evidence of our progress, we have secured a very high profile design win on the Samsung Droid Charge, one of the top selling Verizon 4G smartphones. And with respect to LG, we have secured another high profile design win for the LG Revolution and our relationship continues to be strong with LG.

At ZTE, we are a top rated – we are rated in delivery quality, top rated there, and remained dominant on all the tablets and smartphones at ZTE. At Huawei, we recently received an award ranking us their number one PA supplier. And then lastly, in terms of RIM, while RIM is still ramping down as expected, we continue to work closely with them on new platforms for 2012.

It’s also important to note that we have a 90% share on the 3G Blackberry Playbook. The purpose of these customer meetings was simple, to encourage and strengthen our existing relationships and to foster collaboration and alignment of our product roadmaps. Collectively, I came away from these meetings more confident about ANADIGICS position with our customers and the opportunities we have before us to expand relationships in the future.

Now I would like to give an update on the dedicated team I have created to engage with our largest reference design partner. As I shared with you last quarter, I have implemented the strategy to further our business opportunities with Qualcomm and as a result, we have expanded our engagement on their future reference designs. These efforts have already generated reference design wins for us, both on the LTE Fusion and the Gobi 3K platforms. Most of our customers will be designing with the Fusion chipset, which is expected to ramp in 2012.

Next, let me turn to our product development efforts during the quarter. Our product development task force is doing a great job, rapidly developing new cost-effective products and identifying new opportunities. In terms of new product development in wireless, on our last conference call I had mentioned that we are expanding our served available market with the entrance of PADs, power amp duplexers, and MMPAs. I believe both to be important to our company’s growth and our efforts to expand beyond the traditional PA module market.

So I will start with PADs. To further differentiate our offering, we have integrated high-performance WCDMA, CDMA, and LTE dual-band power amplifiers with duplexers. Our ILV three-level process enables a smaller footprint and lower cost. This will produce – reduce phone board space by greater than 50% versus a discrete or single PAD implementation, and this is absolutely critical in 3G and 4G smartphones.

I am pleased to say that our progress on PADs is ahead of schedule and we are seeing a high level of interest from both current and potential Tier 1 customers. We begin – we will begin sampling this product later in this quarter, which again is ahead of schedule.

Now turning to our multi-mode PAs, we have leveraged what we were previously working on with our MMMB designs over to the MMPAs and I am very encouraged by our progress so far. Our MMPAs have quad-band EDGE and dual-band WCDMA functionality and our development is on schedule. We are anticipating sampling our first MMPA before the end of the year and we are seeing strong OEM interest.

Now importantly, our unique architecture forms the basis for higher levels of integration, this means increased bands and this does this without compromising performance. We are also investigating additional dual-band innovations, which I will tell you more about in the next quarter, but I did want to mention it because our engineers are getting very excited about these multiple new designs.

Turning to our broadband business, we are continuing to increase our served available market for CATV line amplifiers by incorporating GaN, gallium nitride technology, into our surface mount line amplifier portfolio and we are expanding into a hybrid form factor. We have already sampled these products and we’ve sampled them with more than 20 customers and we expect to announce design wins later this year.

In wireless infrastructure, we are also expanding our SAM through higher power efficiency products and that will take us beyond the small cell femtocell markets. And we do this using gallium arsenide and GaN, or gallium nitride, technologies. This has the potential to increase our SAM by nearly $70 million annually. I am also pleased to report that we are close to finalizing a definitive agreement with a Tier 1 OEM for these products.

Let me touch on the improvements we have made in process technology. Our completion of the three-level ILV interconnect technology provides an average of 25% reduction in die size due to an extra level of interconnecting smaller feature sizes. Additionally, it enables optimum flip chip implementation. We are now leveraging the benefits of this new process in all of our wireless product development.

In summary, while we continue to face challenges going into the third quarter, I believe we are making meaningful progress towards rebuilding a solid foundation and reestablishing ANADIGICS as a technology leader. In the short time that I have assumed this position, we have successfully aligned our cost structure with our current revenue levels while keeping R&D intact. We have refocused our energies on more balanced and targeted product portfolios that expand our SAM and wireless from $1 billion in 2011 to roughly $2 billion beginning in the second half of 2012. We have created a reference design team dedicated to the largest reference design partner and have won positions for both LTE fusion and Gobi 3000 platforms.

We have announced key design wins on high profile Samsung Droid phones and LG revolution. We have received a number of awards from our top customers. And lastly, we are now pursuing design opportunities beyond our traditional wireless and broadband customer base to expand our marketing share.

I am confident that these efforts will become apparent in future quarterly results. And speaking on behalf of the entire management team here at ANADIGICS, we remain committed to returning our prof – company to profitable growth.

So, with that, I will turn this over to Tom for the financial update. Tom?

Thomas Shields

Thank you, Ron. As Ron mentioned, our reported revenue for the second quarter of 2011 was $35.6 million. The revenue breakdown was wireless of $25.7 million and broadband of $9.9 million. Our top customers in the second quarter were RIM, Samsung, ZTE, Cisco, Huawei, and LG.

As discussed during our last conference call on May 3rd, we expected revenue generated from RIM to decline sequentially and account for the majority of the revenue change on the first quarter, it did. And for the second quarter, RIM represented 22% of total company revenue compared to 38% of revenue last quarter, a decline of $9 million sequentially.

The reported non-GAAP loss per share was $0.14 and $0.02 better than our prior guidance on lower than anticipated operating expenses. The GAAP net loss for the second quarter was $0.19 per share and included the $1 million restructuring charge for a workforce reduction that we had communicated during our last earnings call. The annual savings from this action is approximately $4 million.

Gross margin for the second quarter was 20% of revenue and in line with our guidance expectations, which factored in the sequential increase in broadband revenue, the sequential decline in wireless revenue, and the lower quarterly fab utilization. The key to our future gross margin expansion opportunities for the company, rest with top-line revenue growth, product mix, increasing fab utilization, and the continuation of project initiatives to drive lower cost of goods.

Operating expenses were $16.6 million and below our anticipated target levels for the second quarter. A temporary pause in the quarter to reprioritize our programs and efforts to achieve a better focus and strong view toward quick turn and time to market opportunities resulting in lower R&D expense. We do expect R&D expenditures to resume to normal levels in the third quarter.

At the same time, we remain cognizant and prudent in monitoring our overall operating expenses in light of current revenue stream without sacrificing R&D investments. In the second quarter, our capital expenditures were $800,000 and depreciation was $4.7 million.

On a strong note, our overall combined balance in cash, cash equivalents, and marketable securities at July 2nd was $103.4 million, a slight reduction of $600,000 from last quarter, which resulted from better than anticipated cash collections from customers. Now, as to the suspension of our quarterly financial guidance as mentioned by Ron in his remarks, the decision to suspend quarterly financial guidance was recently made.

We felt it prudent to focus our time and attention on providing the continued qualitative information required by investors and analysts, thus being dedicated to the long-term business interest than on short-term expectations. This comes especially in light of our inability to accurately forecast revenue resulting from the shift in customer order lead times and the movement by key customers to hub arrangements.

As to operations, our fab utilization is currently operating in the low 50s with expectations to increase this throughout the third quarter. Our corporate capacity strategy remains intact with dual production sourcing coming from within our New Jersey fab and through our founding partnership with WIN Semiconductors in Taiwan. While I’m not providing revenue guidance, we do continue to target our revenue plans on the basis of the second quarter being a revenue trough as mentioned by Ron.

With that, we will now open the lines for questions. Crystal?

Question-and-Answer Session

Operator

(Operator Instructions) Your first question is from the line of Harsh Kumar with Morgan Keegan.

Harsh Kumar – Morgan Keegan & Co., Inc.

A couple of questions. Ron, maybe you can talk to us about historical seasonality for cable infrastructure in the back half and/or how you see it unfolding for your business September, December quarters? And I have got 1 or 2 more.

Ronald Michels

Yes, hello, Harsh. The -- I am not sure I see any real seasonal trends. It seems -- well, there is one major trend with infrastructure right now for cable TV and that is as we don’t have a lot of new home construction, of course, that takes that market down. And it will stay down until construction starts again. Having said that, it bounces up and down almost quarterly depending on what business specifically and what projects our customers are doing at that particular time. And it’s kind of hard to forecast, but I don’t see any real seasonality one way or another going forward.

Harsh Kumar – Morgan Keegan & Co., Inc.

Okay, so fair enough. And then, Ron, in your press release, you talked about growth opportunities in wireless with Korean customers and some Chinese customers. I know you mentioned some design wins in your commentary. Could you maybe qualitatively tell us do you expect, obviously you expect your September quarter to be up in wireless sequentially. Do you, at this point, have visibility to believe that even the fourth quarter should be up from there on?

Thomas Shields

Hey, Harsh, this is Tom.

Harsh Kumar – Morgan Keegan & Co., Inc.

Hey.

Thomas Shields

How are you doing?

Harsh Kumar – Morgan Keegan & Co., Inc.

Doing good, Tom. Thanks.

Thomas Shields

Excellent. Well, as Ron had remarked and I remarked, we certainly feel very good about the business and the key to our revenue relative to Q3 and beyond is what we said, it’s relative to -- our plans call for Q2 being a trough.

Harsh Kumar – Morgan Keegan & Co., Inc.

Fair enough. Thanks, guys. Thank you.

Operator

Your next question is from the line of Dale Pfau with Cantor Fitzgerald.

Dale Pfau – Cantor Fitzgerald Securities

Good morning, gentlemen.

Thomas Shields

Good morning, Dale.

Ronald Michels

Good morning, Dale.

Dale Pfau – Cantor Fitzgerald Securities

Could we talk a little bit more about Qualcomm and your reference design there? You mentioned you have picked up something on the Fusion and you are saying you are not expecting that to kick into production until 2012. And then on the Gobi, everybody else, of course, is targeting Qualcomm. Could you talk about your relative positioning; what other platforms might be coming down the pike there?

Ronald Michels

Well, absolutely. First, we see Fusion as 2012 and there is some derivatives of Fusion that are also coming down the road, and we are designed into one of the bands for LTE, for Fusion. And that is a solid design win and a lot of sampling has gone on to multiple customers over the last, I’d say, 2 to 3 months.

Now, we have products for -- now that’s one band that we are designed in on Fusion. We have products for all of the other bands as well. And actually, the sampling activity on all the other bands has been quite high even though on the reference design with Qualcomm, we are specified for band one. So Fusion is going to be a major -- I believe, a major impact in our business going forward. And I base that on my customer visits as well as if I take a look at how many parts are going out the door as far as free samples, I am thinking we should be charging for these samples. We are sending so many out. That usually coincides very good with what the business is going to look like 3 to 4 months after that point.

We are also working on a multitude of other opportunities at Qualcomm, which are probably too early for me to get into too much information on that, but we are very well engaged. We have 3 conference calls per week with Qualcomm and I’d say, aside from Fusion, we are working on 4 other opportunities there.

Dale Pfau – Cantor Fitzgerald Securities

Great, thank you very much. Now could we talk just a little bit about where you are seeing the trends out there? As you talk to your customers, certainly you are strong in the discrete PAs. And you have mentioned PADs, you have mentioned MMPAs. Are you seeing a real direction from your customers toward PADs, toward MMPAs, or even towards converged or is there still lots of leeway?

Ronald Michels

Good question. Basically, the push is to reduce radio size and battery consumption. Now as everybody knows, LTE has turned both of those things into nightmares for everybody. So radios have to get smaller and the question is which way does the integration occur? Is it in MMMB, is it adding filters into power amps, is it MMPAs? And there is a number of ways that you can do it, so we are addressing all 3 of those to be able to -- because different guys have different ways of doing it. But they are all shrinking the radios and they are all integrating.

There is also more dual bands than single bands, but I think we all expected that. But I think the concept of dual-band PADs is actually, as we talk to customers, there is more pull for that than we’d even thought and we were pretty excited about it. So I’d say if I were to make a guess, you are going to see more of that than integration towards MMMB. And I think – as people switch back to MMMB, maybe in a year from now, but right now I think the performance issues go against some of the issues that these LTE phones have created for everybody. So I’d say PADs, dual-band PADs, are going to be a pretty big trend.

Dale Pfau – Cantor Fitzgerald Securities

Great, thank you very much.

Operator

Your next question is from the line of Quinn Bolton with Needham & Company.

Quinn Bolton – Needham & Co. LLC

Hi, Ron. Just wanted to follow up on Dale’s question, just thinking about the PADs. Did you say that you’re sampling just dual-band PADs where you had single band as well? And then I have got a couple of follow-on questions.

Ronald Michels

Yes, only dual band. We are very specific on what we’ve chosen not to work on to save resources, so we are only doing dual-band PADs.

Quinn Bolton – Needham & Co. LLC

And I am assuming that you are partnering with external third-party buff and soft filter suppliers. But can you talk about the sourcing of the filters and any work you are doing on the engineering side to try and optimize the interface between the duplexer and the PAs?

Ronald Michels

Well, first, I can’t mention who the vendors are just yet. We have 2 solid sources and I’d say we are – we have a good shot at maybe getting that to 4 sources eventually. So I don’t – I personally don’t have a worry on being able to source the filters at all at this point. I was a little bit worried about it a few months ago and now I have much, much less worries as far as that goes. So, as I said, 2 solid sources.

The – and it’s a very good question that you asked because that -- optimizing the interface between the power amp and the filters is a critical thing, which I think that we have got some really nice IT there and some of the performance numbers that we are seeing is starting to excite customers. We are ahead of schedule with it and I feel really good about that project. We have some very good power amp technology that seems to lend itself very well when it gets into the impedance matching and the way we do the interface that you had asked about that makes this especially good for us.

Quinn Bolton – Needham & Co. LLC

Okay. Just thinking about PADs and dual-band PADs, is the reference design team that you have created, is that primarily focused on Qualcomm? Or are there opportunities to get these dual-band PADs attached to future reference designs to try and help expand the reach of that product?

Ronald Michels

Yes, so we have actually -- the team that is focused on Qualcomm is only focused on Qualcomm. Their job is to get to know everybody there, bring back specs to us, keep that interaction going between ANADIGICS and Qualcomm so we work together, which is something that we had 5 years ago that has allowed us to lead the cell phone market. So that team only does that.

There’s other teams, including our sales teams and our marketing groups and lots of customer -- engineer-to-engineer interactions that occur at multiple customers in multiple locations. And that’s where a lot of, I would say, the salesmanship is occurring for these PADs. So it’s not just -- in this particular case, it’s not just Qualcomm.

Quinn Bolton – Needham & Co. LLC

Okay. And then the last question, you’d mentioned the MMPA. Is that product targeted at specific Qualcomm reference designs or are you seeing broader interest in an MMPA across either other OEMs or other baseband partners? And that’s the last one for me, thanks.

Ronald Michels

Okay, good question. The answer is yes on both. We are talking to Qualcomm on some specific reference designs and in parallel talking to customers as well and getting interest.

Quinn Bolton – Needham & Co. LLC

Thanks a lot.

Ronald Michels

You’re welcome.

Operator

Your next question is from the line of Edward Snyder with Charter Equity Research.

Edward Snyder – Charter Equity Research

Thanks a lot. Tom, OpEx returning to normal levels next quarter, when should we begin modeling the savings from the restructuring? Does that occur this year or should we start looking at that next year? And then back to Qualcomm, if you fail to meet the deadline for the design that they are providing to RIM, are you now qualified on that design? And is it a possibility that future RIM products using that Qualcomm design could include your part? And I had a follow-up.

Thomas Shields

So I will answer the first question, then Ron will answer the second question regarding Qualcomm. Regarding OpEx, the workforce reduction took place in May and we have accounted for at least a month and a half of savings in Q2, a full quarterly savings in Q3. However, regarding the change in the workforce, very little impact to R&D. Majority was outside of R&D and included the likes of operations and shared services. So that’s why R&D principally is R&D material costs, which is variable in nature and will fluctuate quarter to quarter.

Edward Snyder – Charter Equity Research

So if that’s the case, then is it just holding the line on growth in SG&A, more so than cutting into SG&A?

Thomas Shields

That’s correct.

Edward Snyder – Charter Equity Research

Okay. So something closer to maybe what we saw in the March period would be better for OpEx?

Thomas Shields

That’s fine.

Edward Snyder – Charter Equity Research

Okay. Thanks, Tom.

Ronald Michels

Okay. To answer the question on RIM regarding Qualcomm, no, the reference design that we were not in that resulted in much of the loss in our RIM business that we are experiencing today, that’s gone, that’s past history. Fortunately though, some of what RIM is doing is directed towards the Fusion reference design and that opens the door for us for next-generation design wins.

Edward Snyder – Charter Equity Research

Is that just on handsets or is it mostly tablets, or vice versa? Is it just on tablets or can you also get on handsets with the Fusion at RIM?

Ronald Michels

Yes, we are in the tablet today, the 3G version of the tablet, but what I am referring to is future business in the future where they will be switching in 2012 on some models to the Fusion reference design, and that will open up opportunity for ANADIGICS.

Edward Snyder – Charter Equity Research

Yes. And then, Tom, can we maybe get a little bit more color on the revenue breakdown, say WiFi, WiMAX, wireless infrastructure, and set-top box?

Thomas Shields

Sure. In broadband of the $9.9 million, set-top box was just slightly down to Q1. It stood at $2.2 million for the second quarter. Cable infrastructure was up over $2.5 million to $4.8 million from $2.3 million last quarter. WiFi was down by $0.5 million to $1.2 million. We saw a nice pick-up in WiMAX of $900,000 to $1.5 million, and we had roughly $300,000 in the Other category.

Edward Snyder – Charter Equity Research

And then you are guiding for utilization to pick up. Is this mostly on content mix or better revenue, do you think?

Thomas Shields

Well, the first thing we are attacking basically is the short order lead times. So instead of having the typical 6 to 8 weeks, we are now down to perhaps 2 to 4 weeks relative to the customers that make up the majority of our revenue. As a result, we realized that we need to build safety stock. Also, there is an obligation for us to house inventory on a consigned basis in hub arrangements for certain customers, so it’s in relationship to that. But certainly, obviously we’d be optimistic relative to some of the revenue exchanges that we expect in the back half of the year.

Edward Snyder – Charter Equity Research

But most of the short-term is going hub inventory and getting some safety stock up, is that fair?

Thomas Shields

Not necessarily.

Edward Snyder – Charter Equity Research

Okay. Thanks, guys.

Operator

Your next question is from the line of Paul McWilliams with Next Inning Technology.

Paul McWilliams – Next Inning Technology Research

Thanks for taking my call. Marvell has stated on some of their conferences that they have won some new designs up at RIM. Do you happen to know if you are on any of those new designs that they claim will be going into production yet this year?

Ronald Michels

I don’t believe we are.

Paul McWilliams – Next Inning Technology Research

Okay. How deeply sourced, in other words, how many sources are on this LTE reference design at Qualcomm? Are you the only source or are there one or two others?

Ronald Michels

For the band we are designed into, we believe we’re a sole source. And if you look at the PAs that are on the reference design in its entirety, I believe, I could be wrong, but I believe it’s 2 sources.

Paul McWilliams – Next Inning Technology Research

Okay. When in 2012 do you believe that those reference designs will start building some production capability?

Ronald Michels

I’d say the second half of 2012.

Paul McWilliams – Next Inning Technology Research

Okay. And you were kind of quick when you went through the customers; ZTE, you made a pretty strong statement about your coverage there. Could you restate that?

Ronald Michels

Yes, so ZTE is really doing well. They have been building market share. They don’t get a lot of press on it but they have been building market share really, really quickly, and so, they are a great customer for us to build with. We are in most of their tablets. I think there is 7 different tablets that they have and we are in all of them, and we are in a number of smartphones as well. And of course, they are doing a switch from feature phones to smartphones and looking to capture new market. And we are working with them on a lot of new platforms. And hopefully, they will continue to enjoy the growth that they will have.

And the other piece actually that’s very strong for us with ZTE is they have a big piece of the data card market and they use ANADIGICS for most of those products.

Paul McWilliams – Next Inning Technology Research

Are you on only the ones that they are doing with the Qualcomm baseband or also with the Icera baseband?

Ronald Michels

I believe we are on both.

Paul McWilliams – Next Inning Technology Research

Excellent, congratulations. Now we have kind of beat around Q3 a little bit; let me ask it another way and see if you are comfortable with this. It sounds to me as though you are pretty confident of a sequential increase, but you just aren’t comfortable with how much. Would that be a fair statement?

Thomas Shields

This is Tom. Essentially, in my remarks, I mentioned that we are focusing on the long term because of the major programs and the customer engagements, so certainly we would expect in some of the commentary relative to when designs kick in more toward the middle of next year. So the comment relative to revenue is what we say relative to internally, which is, drive the revenue to indicate that Q2 is a trough.

Paul McWilliams – Next Inning Technology Research

Okay, fair enough. I understand. Thank you for your time.

Thomas Shields

Thanks, Paul.

Paul McWilliams – Next Inning Technology Research

Thank you.

Operator

(Operator Instructions) The next question is from the line of Todd Koffman with Raymond James.

Todd Koffman – Raymond James & Associates

With regard to your decision no longer to provide quarterly revenue guidance but signaling you will be up sequentially, is there that much variability now in the near-term business that motivated you to change your procedure?

Thomas Shields

Yes, this is Tom. You know, certainly indication, it was the fact that our internal goal was to -- hopefully that Q2 would be a trough. In Ron’s comment, he made mention the last quarter and we reiterated this time, which was that we couldn’t be certain that Q2 was going to be a trough. Even today, we stated the same thing. Now in regard to the change that’s taken place, when you have one customer that represents close to 40% of your revenue on a quarterly basis, their lead times are long, so you have a pretty good visibility into what the shipments will be and when they are going to occur.

As a result of the dominance being placed on our customer portfolio between the Korean and the China customers and certainly distribution, those lead times are very short. So it’s very hard to accurately predict the revenue with specificity. So as we looked and discussed internally what’s the best approach we should take, and we believe that the investor analyst wants qualitative information, which we’re hoping that we are providing you at the same time, trying to get away from short-term expectations.

But we are trying to give enough information to see where the company is performing, what we can achieve longer term. So it’s really the customer shift that we have currently in the portfolio alongside of a couple of changes that have taken place with certain customer’s relative to the use of hub. So they can fully inventory at their leisure as opposed previously, we used to have the orders on the book ahead of time.

Todd Koffman – Raymond James & Associates

Thank you. That’s helpful. Just a quick follow-up question, you talked about I guess the middle of next year being the timeframe when maybe you might have some success in some of these new design wins. Would that be the timeframe that you would expect to get the design win awards or – and subsequent revenue in the back half of 2012, or are those potential design win decisions earlier such that those new product design wins would be revenue in the middle of next year?

Ronald Michels

It’s a combination of both, but certainly I would say that we see the second half of the year as benefiting from these products that I am telling you about today. It’s hard to predict how long it takes. So in the case of MMPAs, for instance, it will probably be close to the end of the year before we supply hardware. Let’s say, that gets on a reference design, well, then it can be anywhere from six to nine months before that turns into a production order.

However, on the PADs we are ahead of schedule and we are going to be sampling a few months earlier than that. That could happen earlier; I would hope it will happen earlier. The Fusion reference design, customers are telling us that to be prepared for production in the second half of the year. So that’s as much visibility that I have at this point. It’s a combination of both, but I think the second half we are going to see some results from the things we are talking about today.

Todd Koffman – Raymond James & Associates

Thank you very much for the clarification. Good luck.

Ronald Michels

Thank you.

Operator

Your next question is from the line of Aalok Shah with D.A. Davidson.

Aalok Shah – D. A. Davidson & Co.

Good morning, guys. Just a couple of quick questions. Tom, you mentioned hub-based inventory for a couple of customers. Can you walk us through who the company’s customers are at this point? And then secondly, in terms of your guidance, I know you don’t want to give any specific guidance, but is there any way to kind of tell what segment we should be really focusing in on in terms of growth in the second half of the year?

Will it be the infrastructure side that starts to pick up again or will it be the wireless guys that you guys are more excited about at this point? And then lastly, in terms of your competition, at this point I am sure your competition is not standing still. I am trying to figure out how differentiated your products will be, especially the Fusion product line as we go forward.

Thomas Shields

Okay. So regarding customers, I mentioned certainly they are coming from both Korea and China, majority from China relative to the hub arrangements. Relative to growth aspirations, by far the largest segment out there is wireless. So we certainly see a great opportunity on the broadband side, but really the wireless are the biggest and that’s where we see a majority of the growth occurring in the future. And then you had a third question.

Aalok Shah – D. A. Davidson & Co.

The differentiation versus your peer group?

Ronald Michels

Yeah, that’s a good question; a lot of competition, a lot of great companies in this space competing with ANADIGICS and we have tremendous respect for all of them. ANADIGICS has a phenomenal base technology. We had a fab that we have put well over $80 million of capital improvements into – just in the last couple years. We have a BiFET process which can do things that other less complex processes cannot do. And we have a lot of IP and patents on different types of power amps that we led the market with. It wasn’t that many years ago, it’s only four years ago when we were, I believe, a year or two years ahead of everybody else.

So when I took the job I felt we were a little bit behind. We lost a key reference design at Qualcomm and that kind of started to have us take a look at what are we doing and how competitive are we. I am happy to say at this point, with the approximately 200 people we have on designing products, that we are just cranking things out at the speed of light. And it’s just an energized group. And we are pulling from technology and IP that we have had years ago and doing things with it that are surprising all of us.

So I guess you’ll just have to wait to see what the results are going forward. But, as an example, dual-band PADs; there is nobody out there shipping those today. And we think we are on par with any other work that’s happening in any of our competitors or even ahead, and that’s a product that we only started a few months ago.

So on the MMPAs we have an architecture which really we started looking at this kind of thing two years ago, which we feel it’s really unique. We have a lot of patents around it, which enables scaling and adding bands beyond just the quad-band EDGE and two bands of WCDMA to get us into what today people call an MMMD. I think we will give it a different name when we actually get there. But it allows us to scale with the same level of performance we have now on single-band and dual-band PAs.

So not getting into too much of what we consider proprietary, I believe that what you are asking about is not going to be an issue. That’s the one thing where ANADIGICS is really strong and that’s on both IP in the circuit design area and in process technology.

Aalok Shah – D. A. Davidson & Co.

Ron, just in terms of – also just in terms of the relationship with the WIN as we go forward, how should we think about that now? You mentioned that you have got a great fab in New Jersey. I am just trying to figure out how the relationship with WIN will emerge as we go forward.

Ronald Michels

Good question. We haven’t talked too much about WIN, although I believe Tom mentioned that we are still – we do have a second source. We have WIN as our second source. We have worked with WIN to develop a BiFET process similar to what ANADIGICS has. And it’s – in RF, you can’t just take the same circuit and run it in 2000 and get the same results. It requires mask set changes and sometimes design changes. But that’s a process that we have been undergoing for close to two years now. And some of the key products we see in that ramp that we are hoping for in the second half of next year will be products that are designed in the WIN process.

We have actually sampled the customers’ products, both from the ANADIGICS fab and the WIN fab. So we are absolutely making sure that some portion of what we are shipping in high volume production next year will be done at WIN, regardless of the fact that we still have 50% of utilization here that we want to fill. But we absolutely will not get caught with not having enough capacity.

Aalok Shah – D. A. Davidson & Co.

Last question from me, and I know, again, you are not giving guidance, but is there a way to measure for investors to kind of figure out how we should think about you at this point, in terms of how you guys are progressing upon your goals? Given that we won’t see these design wins materialize probably until sometime late next year, is there any kind of metrics we should be focusing on that you think we should be focusing on at this point?

Ronald Michels

That’s a good question and we discuss those types of metrics internally all the time on how we track ourselves. I think that – I hope that I am giving a lot of visibility as to where product development is; we are talking specific products and programs. And I think in each earnings call you will know exactly where we are. In the next earning call, for instance, hopefully we will be talking about how many customers we have sampled these PADs to and what kind of feedback we are seeing. So I think there will be quite a bit of visibility and you will be able to track where we are pretty easily.

Aalok Shah – D. A. Davidson & Co.

Thank you very much.

Ronald Michels

Thank you.

Operator

Your next question is a follow-up question from Edward Snyder with Charter Equity Research.

Edward Snyder – Charter Equity Research

Thanks. Sorry to bug you again guys, but you have been talking about dual-band PADs and no one has got them out yet but TriQuint has been working on it and even mentioned there is a new product on the last call. Any idea at all how you stack up against their parts, specifically on size but also on performance, especially with regard to Band 2 given they’ve got that ball process which will do Band 2?

And then, Ron, it looks increasingly likely that Qualcomm is moving away from polar to linear and that it appears to have given Avago an upper hand in a couple of designs; the iPhone is the most recent one. If that becomes a wholesale shift, if we drop out of polar and just do linear because of LTE and everything else, where do you think you stack up on that? I know you guys have done both. You have been real good in wideband CDMA. Do you feel like you have an advantage if it moves all linear or doesn’t really make any difference to you? Thanks.

Ronald Michels

Yeah, some very good questions. First, let me talk about Qualcomm. That shift was pretty obvious to us probably a year ago, and – even more than a year ago, and we have made that shift with them. So everything we are designing for those markets is in close alignment with Qualcomm and not an issue for ANADIGICS at all.

On the other question, which was, trying to remember what the...

Edward Snyder – Charter Equity Research

Dual-band PAD.

Ronald Michels

...on the PADs, yes. You mentioned one of our competitors. We are working to, I believe, similar or the same size package outline as the competitor you mentioned. I think the difference will be, and I don’t know, I don’t have any idea what their performance is, but there is two things that will differentiate us. I don’t think it will be the filters, by the way. I think that that’s something that we will source from multiple places and I think all the filters make the specs. I may be wrong, but I don’t think that’s a point that’s going to make the difference. What will make the difference will be how good is the power amp and then how good is the interface of the power amp to the filter. And that’s where I think it is two places where we are very strong.

Edward Snyder – Charter Equity Research

And that kind of brings up another question. In Band 2 it has been kind of a de facto of Avago business given they – the S-Bar is the only one that can really meet that spec. Well, not meet it but exceeded all the other ones. And I know that TriQuint’s BAWs improved last year to the point where now they rival Avago. And I know they have plans to attack the Band 2 area, which is the more lucrative of all of the bands.

But that brings up a good question. In the PAD, and there is some chatter that the Japanese vendors now achieved kind of the similar performance in Band 2. So are we at parity enough on the filter that when you put it into a PAD, because the interstage match and the amplifier has so much to do with the overall performance of the PAD that you don’t think it makes any difference that you could be competitive on Band 2 given how much better the ASPs are on that part than otherwise? Or is it something you have to get workout still and see how that shakes out? Because apparently Japanese vendors hasn’t published any specs on it yet so I have no idea how well that filter actually works.

Ronald Michels

Yeah, so I can’t say who we are working with at this point as far as filter vendors, but I will say we have a Band 2 solution and so we’re not particularly worried about that. And I think I absolutely agree with your comments that in the other areas that will make the difference. But we think we are covered on Band 2.

Edward Snyder – Charter Equity Research

Excellent. Thanks, Ron.

Operator

At this time, I am showing there are no further questions.

Ronald Michels

Okay. Well, thank you very much. Questions were excellent and ANADIGICS is committed to taking the products that you heard about today and turning them into real financial performance improvements. And thanks again and we will talk again soon.

Operator

This concludes today’s conference call. You may now disconnect.

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