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Peregrine Semiconductor Reports Q2 Results; Revenue Up 20 Percent

Peregrine Semiconductor Corp., the San Diego maker of high performance chips contained in a host of wireless devices and delivery systems, continued its fast growth curve in the second quarter with $52.4 million in revenue, up 20 percent from the like quarter of last year.

For the six months, Peregrine reported revenue of $99 million, up 11 percent from the first half sales of last year.

Peregrine had a net loss of $448,000 in the quarter and $1.6 million for the first half, compared with net losses of $26,000 and $3 million respectively for the like periods of last year. The company attributed the losses to increased levels of stock-based compensation; on an operating basis, Peregrine said it made profit of $1.2 million in the quarter.

The results pushed the stock price to nearly two points in the days following the announced results. Shares, traded on Nasdaq under PSMI, closed at $11 — giving the company a market capitalization of $362 million.

CEO Jim Cable said Peregrine continued to expand its product offerings in a wide variety of areas that it supplies to, and was still seeing growth in supplying components to the cellphone parts manufacturers.

Slow Sales at High End

“We think the smartphone industry is undergoing a normal transition, but rapid growth at the high end is slowing,” Cable told analysts in a conference call. However, growth in the mid-range and entry range phones is strong, he said.

About 70 percent of Peregrine’s sales are to Murata Manufacturing Co. of Japan, which is a primary supplier of front-end modules to Apple, Samsung and many other cellphone makers.

In addition, the company makes chips and components contained in products for wireless infrastructure, satellites, defense, automotive and testing and measuring equipment.

But it’s Peregrine’s patented silicon-on-sapphire technology that is driving most of its growth and providing an advantage over its competitors, said several analysts covering the company.

“We believe Peregrine’s patented UltraCMOS technology provides competitive advantages such as better performance, improved integration, and lower power than competing technologies,” said T. Michael Walkley, with Canaccord Genuity, who rates the stock a buy, and estimated its 12-month price target at $13.

Brian Modoff, an analyst with Deutsche Bank Market Research, said Peregrine is benefiting from an expanding market for smartphones both on the highest ends, and less powerful phones aimed at consumers in emerging markets.

Peregrine Well Positioned

“While saturation at the top-tier is a common investor fear, it is still a place Peregrine can potentially increase its share,” Modoff said in his report. “Moreover, we believe the mid-tier (cellphone market) could prove important to Peregrine. Here the addressable market increases drastically as emerging markets upgrade from 2G to 3G. Peregrine remains well positioned in the front end to take advantage of this cycle.”

Modoff, who also recommends PSMI as a buy, estimates a target price of $14 over the next year. Reaching that level would return it to the stock’s initial public offering price when it debuted a year ago, raising some $77 million. Shares went into a decline earlier this year, apparently due to concerns of much reduced higher-end smartphone purchases.

In his talk with analysts, Cable noted the company’s development of new products particularly its digital tunable capacitors, used in smartphones to cover more frequency bands with smaller antennas.

He said the company recently struck deals with 60 customers for the DTC products, and expects to expand this business.

“We want to aggressively move in that direction and we have a number of products planned in the future that will also be direct sales to the end OEMs,” Cable said.

For the third quarter, Peregrine forecast total revenue to finish in the range of $58 to $62 million. The company doesn’t provide diluted per share earnings forecasts.

Most analysts forecast Peregrine’s annual revenue to come in about $225 million for annual growth of about 10 percent over the prior year’s revenue of $204 million.

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