RFMD » Topics » GROSS PROFIT

This excerpt taken from the RFMD 10-Q filed Feb 7, 2007.

GROSS PROFIT

Three Months Ended
December 31,


Percentage

Nine Months Ended
December 31,


Percentage

(In thousands, except percentages)

2006

2005

Change

2006

2005

Change

Gross profit

 $

100,497   

 $

74,981   

34.0%          

 $

266,294   

 $

193,040   

37.9%      

As a percent of revenue

35.8%

36.1%

 (0.3)ppt

34.7%

35.5%

(0.8)ppt  

Our decrease in gross profit as a percent of revenue (gross margin) for the three and nine months ended December 31, 2006 was primarily the result of respective increases of $0.7 million and $3.0 million in share-based compensation expense included in cost of goods sold.  Our decrease in gross margin for the nine months ended December 31, 2006 was also the result of the adverse impact from defective material furnished by a supplier during the second quarter of fiscal 2007.  Other factors that have impacted gross margins for the three and nine months ended December 31, 2006 were a decrease in average selling prices coupled with a change in our product mix.  These decreases were offset by improved capacity utilization and yield improvements as well as lower costs for silicon and surface mount devices. 

We expect to reduce our cost structure during the remainder of fiscal 2007 by reducing assembly costs through our internal assembly expansion, by expanding production of internally manufactured pHEMT switches and by improving our total yield across the supply chain.

Historically, our corporate average selling price ("ASP") has decreased as selling prices for our products have decreased on a per function basis.  During the first nine months of fiscal 2007, we offset this historical trend by expanding our dollar content on a per-unit basis through increased sales of transceiver modules and transmit modules, which command ASPs above the corporate average, and by increasing prices for certain products.  In addition, the following factors will continue to impact our gross margins: (1) capacity utilization; (2) product test yields; (3) costs and quality of externally sourced materials and services; and (4) cost efficiencies of internally-sourced materials and services, including our assembly operation in Beijing, China.

This excerpt taken from the RFMD 10-Q filed Nov 8, 2006.

GROSS PROFIT

Three Months Ended
September 30,

 

Six Months Ended
September 30,

 

(In thousands, except
percentages)


2006


2005

Percentage
Change


2006


2005

Percentage
Change

Gross profit

 $

86,141   

 $

63,749   

35.1%       

 $

165,797   

 $

118,059   

40.4%        

As a percent of revenue

34.9%

36.0%

   (1.1)ppt

34.2%

35.1%

    (0.9)ppt  

Our decrease in gross margin for the three and six months ended September 30, 2006 is primarily the result of a decrease in average selling prices coupled with an increase in the percentage of outsourced GaAs pHEMT, higher commodity costs, higher pricing of third-party assembly services and adverse impacts from defective material furnished by a supplier.  These decreases were partially offset by improved capacity utilization and yield improvements.  Our decrease in gross margin for the six months ended September 30, 2006 is also the result of an increase in share-based compensation expenses of $2.4 million in cost of goods sold for the six months ended September 30, 2006 as compared to the six months ended September 30, 2005.

We expect to reduce our cost structure during the remainder of fiscal 2007 by reducing assembly costs through our internal assembly expansion, by expanding production of internally manufactured pHEMT switches and by improving our total yield across the supply chain.

Historically, average selling prices for our products on a per function basis have decreased.  We have offset the effect of this historical trend on corporate average selling prices during the first six months of fiscal 2007 by expanding our dollar content in cellular handsets through increased sales of transceiver modules and transmit modules and by increasing prices for certain products.  In addition, the following factors will continue to impact our gross margins: (1) capacity utilization; (2) product test yields; (3) costs of externally sourced materials and services; and (4) cost efficiencies of internally-sourced materials and services, including our assembly operation in Beijing, China.

This excerpt taken from the RFMD 10-Q filed Feb 9, 2005.
GROSS PROFIT
Gross profit for the three months ended December 31, 2004 decreased to $58.4 million, or 34.6% of revenue, compared to $80.4 million, or 41.7% of revenue, for the three months ended December 31, 2003.  For the nine months ended December 31, 2004, gross profit decreased to $172.3 million, or 35.6% of revenue, compared to $185.5 million, or 38.0% of revenue, for the same period ended December 31, 2003. The gross profit percentage decrease for the three and nine months ended December 31, 2004 compared to the three and nine months ended December 31, 2003 was primarily due to lower sales and production volumes, price erosion and a change in our product mix. 

We have historically experienced significant fluctuations in gross profit margins and, consequently, our operating results, and we expect such fluctuations to continue.  Gross margins are routinely affected by downward pressure on average selling prices and the cost of silicon components and other raw materials.  As a result, we will continue to focus on cost reduction efforts, including (1) strategic supply relationships, such as with Jazz Semiconductor, which provides us with a committed, lower-cost source of supply for silicon wafers, (2) achieving higher levels of product integration, (3) successfully implementing test yield and assembly improvement plans, such as investing in our own assembly capabilities in Beijing, China to obtain a lower overall cost structure and other supply chain savings, and (4) increasing our capacity utilization.
 

RESEARCH AND DEVELOPMENT
Research and development expenses for the three months ended December 31, 2004 were $38.8 million, or 23.0% of revenue, compared to $31.9 million, or 16.5% of revenue, for the three months ended December 31, 2003.  For the nine months ended December 31, 2004, research and development expenses were $111.3 million, or 23.0% of revenue, compared to $93.8 million, or 19.2% of revenue, for the same period in the prior year.  The increase year over year resulted from investments in research and development efforts to support the design of next generation EDGE and multi-mode transceivers, additional investments in modeling tools and resources to decrease our product development cycle time, new developments of semiconductor technology and the acquisition of Silicon Wave during the first quarter of fiscal 2005.  These investments resulted in increased headcount and related personnel expenses, including salaries and benefits.  We plan to continue to make investments in research and development and expect that such expenses will continue to increase in absolute dollars in future periods.
 

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