RF Micro: Time for a Leadership Change

RF Micro (RFMD) has been a serial disappointment for over 7 years now. Excluding the dot com bubble, the stock has traded in range from $2 - $9 since 2Q 2002 (a slow painful erosion of shareholder value). Using the stock price as a measure of management's success or lack thereof you can see that management's strategy has failed miserably.

Note to RFMD management: This is your legacy. Grade: D+. You avoided an "F" because you are not bankrupt. Go back and look up what it means to "align your interests with shareholders." The share repurchase was late and reeked of desperation. Share buybacks are initiated when you have no better use for cash or you believe the shares are undervalued - not to mitigate erosion in the share price due to a lack of public confidence.

For a time, the company enjoyed a brief reprieve during the Motorola (MOT) RAZR's success, but that was short-lived when Motorola imploded due to its self-inflicted design bureaucracy and belief in Ed Zander, who turned out to know as much about wireless handset design and strategy as my dog.

Additionally, the hub-and-spoke concept that companies like Motorola and Nokia (NOK) impose on companies like RF Micro insolate the former from risk, but make business for the latter unpredictable. This is just one of many bad deals RF Micro has engaged in, the worst being its latest acquisition of Sirenza. This was the right strategy but the wrong time.

I am always amazed at how long it takes companies to recognize and act on revenue concentration issues. RF Micro should have gone down this road ages ago. Instead, it opted to buy at the top of a credit bubble and is now trading close to 1998 levels. The way the stock has behaved, you would think the company had subprime exposure.

It's long overdue for RF Micro's board to make some leadership changes. Management has gorged on stock options over the years and has failed to build a proven model that drives sustainable results. The sudden retirement announcements (wink, wink) of William (Bill) J. Pratt, chief technical officer, and Powell T. Seymour, corporate vice president of strategic operations, are a start, but they are not the source of the problem.

Comments

[vvti:]

Its easy for Bob to throw stones. I am an electrical engineer who has used RFMD semiconductors - they have an excellent product. This field (cell phones) is the most difficult and demanding in all of electrical engineering. They are growing revs every year, and still making a profit. Could they do better? What company couldn't? Does WS like them? Hell no - $2.86 per share! The company is way undervalued, but lets not blame management for that. Let them do their job, and the stock price will rise....(meanwhile, get in while you can!)

2008 Apr 02 07:10 AM

[papita:]

get out, stay away but do not get in. his could be the worst performing stock in the last 10 years right up there with jdsu. this company always disappoints even when they beat wall st. expectations. they always say something that sounds bearish. it is a horror. put your money anywhere but here. this company is a disaster. and stay away fro $2 stocks!

2008 Apr 02 07:51 AM

[grannybananny:]

When you can't meet deadlines you lose. RF has a lack of LEADERSHIP. Leaders have a view of the whole picture, the norms and standards of the company and how each part effects the whole. What we have here are too many whiners and mewers who are interested in the emotional well being of the workers instead of productivity. In other words, we have MANAGERS who are interested in being well liked. They are pushing their own personal agenda. The "lower" ranks are where the war is won or lost. Somebody better pay attention.

2008 Apr 02 01:08 PM

[sgrm33:]

Priddy and co need to go.These guys have been cashing in their cheap
options and becoming very rich....at the expense of the shareholders............. they say in texas: Get A Rope!

2008 Apr 08 02:00 AM

[User 175800:]

i WANT MY MONEY BACK

2008 Apr 09 05:08 PM