The parade of mobile/wireless technology IPOs continued with Peregrine who recently priced 5.5M shares at $14 which was the low end of the expected range. We've seen a number of strong new semiconductor names like Invensense (INVN) and Audience Technology (ADNC) go public recently. Peregrine shares are now trading on the NASDAQ under symbol (PSMI).
Deutsche Bank and JP Morgan led the deal along with co-managers RBC, Needham, Oppenheimer and Pacific Crest.
Peregrine is a fabless semiconductor firm of 300 people in San Diego, CA. Their secret sauce is a special process called "Ultra CMOS" that can be used in advanced applications like RF. Positioned as a broad wireless play across many customers and end markets.
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They fall into a competitive sector that includes a range of broad and specialized companies including RFMD (RFMD), Analog Devices (ADI), Intersil (ISIL), Texas Instruments (TXN), Avago (AVGO), M/A-COM (MTSI), Triquint (TQNT), Skyworks (SWKS) and Sequans (SQNS).
The company growth strategy is about taking more share from conventional multi-package RF front-end solutions in a growing market. In other words, integration onto a single chip has big advantages. The company claims that their UltraCMOS platform offers greater efficiency and better integration of different RF functions. For example, compared to Gallium Arsenide (GaAs) their component size has shrunk further and faster to be less than half the size of an equivalent GaAs component.
Digitally tunable 4G antennas are an opportunity where they are getting $.50 per unit now, which can expand towards $1 in subsequent generations of product. Added to the antenna switch and 3G front-ends the total content per smartphone can approach $3/unit.
There is a strong emphasis on innovation and IP development with 125 patents granted/pending and hundreds of trade secrets.
Peregrine enjoys a stable management team with industry backgrounds including TRW, Hughes, PMC, Schlumberger (SLB), Texas Instruments, Motorola (MMI), Northrop (NOC), Comsat and Unisys (UIS).
Revenues are up 73% YoY for the first half of 2012 and the company is at $160MM year revenue run rate. Customers are somewhat concentrated with one, Murata, making up a large (61%) and increasing portion. Murata distributes to multiple handset makers so the picture is more diverse than it appears.
Gross margins have reached 46% with a target model of 50%. The overall target for operating income is 15-22%, which comes mostly from improved gross margin and lower SG&A costs as a percentage of revenue.
As a first look the deal looks solid with a valuation that is supportable. If the stock opens and trades quietly this one is worth digging into. The major concern is the hyper competitive nature of the industry and the power that the end-market players like Apple (AAPL) and Samsung (SSNLF.PK) have in terms of pricing.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
