Portable, Wireless Growth Boosting Semtech Results CORPORATE FOCUS by CARLOS MARTINEZ, Staff Reporter Growing demand for portable computers and personal digital assistants is helping to boost sales and earnings at Semtech Corp. The Camarillo-based analog semiconductor maker finished 2002 with a profit of $42.2 million or $0.54 per share on sales of $193 million, compared to a year earlier when it reported earnings of $26 million or $0.33 per share on sales of $191.2 million. Semtech’s performance is the result of growing demand in the laptop, cell phone and PDA markets, said Semtech CEO Jack Poe. “The use of power, protection and human input devices in notebook, cellular phone and other portable applications is gaining traction and now represents 44 percent of net sales,” Poe said. Semtech makes analog and mixed-use chips for laptop computers, cell phones, PDAs and other devices. It also makes power supplies, computer keyboard encoders and related electronic components. Semtech had targeted much of its sales activity to the desktop PC market, but when the market for those computers began to decline in 2000, the company switched its focus to portable computers and wireless products. In the most recent quarter ended in January, Semtech said that sales for cellular phone applications were the largest source of revenue for the company, followed by applications for notebook computers, PDAs and desktop computers. The fourth quarter, however, was relatively flat against last year. For the period ended Jan. 26, 2003, Semtech reported $8.1 million or $0.11 per share in net income on $44.5 million in sales. That compares with net income of $8.7 million or $0.11 per share on sales of $46.4 million for the same period in the prior year. After the release of its quarterly and year end numbers on Feb. 25, however, Semtech’s stock price rose $1.13 or 8 percent to $13.40 a share. Over the past 52 weeks, the company’s stock has traded as high as $39.12 and as low as $8.72. On Friday, March 14, shares in Semtech closed at $15.32. Louis Gerhardy, an equity analyst with Morgan Stanley in San Francisco, said Semtech’s overall improved performance was the result of refocusing its efforts from the desktop PC market and into wireless, PDA and laptop products. “Manufacturers recognize that the public wants these portables and they are doing everything possible to provide them and it provides this growing market for people like Semtech,” Gerhardy said. Likewise, Lauren Fine, an analyst with Merrill Lynch, said the company is well positioned for steady growth as the portable computer market continues to expand. Semtech also initiated a cost-cutting program last year, eliminating is wafer manufacturing plants in Northern California and Texas and making other cuts in its workforce throughout the operation. Gerhardy said those cuts also helped to improve the company’s bottom line. Gerhardy expects to see continued improvement in the company’s financial results throughout the year, but he added that much will depend on the success of Intel’s next-generation bundled chipset, which uses Semtech components. As with most other companies, a war with Iraq could also affect the Semtech’s future performance, Gerhardy said. Semtech is positioning itself to sustain its sales momentum, particularly in the portable computer, cell phone and PDA markets, with an aggressive marketing strategy, the company said. Sales projections for the current quarter, however, are flat since the period is traditionally a slow one, the company said. Gerhardy has a target of $22 a share on the stock price. He said revenues for 2003 should increase about 4 percent over last year. “It’s modest growth,” Gerhardy said, “but in this economy that’s a good sign.”
