Credit: Shutterstock photoW hen Greg Waters took over as CEO of Integrated Device Technology in January 2014, he had a pretty good idea of how to turn the integrated computer solutions (ICS) maker around.
At the time,Integrated Device Technology ( IDTI ), or IDT, had just begun to emerge from a lengthy run of sales and earnings declines.
Waters and his new executive team wanted to formulate a long-term plan to ensure consistently strong growth for IDT, which makes memory, logic and telecom chips for the consumer, computer and communications infrastructure markets.
So the team identified key markets that displayed the right combination of growth potential and high margins.
"We did a refocus into a smaller number of high-growth markets," Waters told IBD. "We focused on wireless communication infrastructure, data center solutions and wireless charging. We put the whole company behind those three things because all three represent great growth opportunities for us."
Going For IT
That shift in focus has already paid off for IDT, which is in the middle of its strongest financial run in recent memory. The company has posted double-digit or better earnings and revenue growth in three of the last four quarters, and its stock has been trading at multiyear price highs lately.
Analysts sound confident that IDT can continue to produce robust gains in future years.
"We are positive on IDT's fundamentals as the company is expected to book order inflow for new products and higher margins," Chardan Capital Markets analyst Jay Srivatsa said in a recent research note. "Additionally, IDT's EPS growth and EBIT are higher, compared to peers over 2013-15."
IDT's rivals in some or all of its markets includeLinear Technology ( LLTC ),Texas Instruments ( TXN ) and Germany's Infineon Technologies.
Like those companies, IDT suffered a slowdown in business in 2012 and parts of 2013 amid an overall industry slump. As that market has improved, so has IDT's operating performance, analysts say.
During its fiscal 2015 third quarter, which ended in December, the company logged 20% or higher EPS and revenue growth for the first time since at least 2011.
"There's no great mystery about our success," Waters said. "It's a simple matter of the right products, the right new content and the right execution."
IDT's technology lineup includes timing solutions, radio-frequency ( RF ) and microelectromechanical sensors (MEMs), switches and legacy memory and logic products.
Most of its revenue -- 64% in fiscal 2014 -- comes from the Asia/Pacific region, excluding Japan. The rest is split between the Americas (15%), Europe (13%) and Japan (8%). Its customers include Samsung,Intel ( INTC ),Micron Technology (MU) and SK Hynix.
IDT breaks down revenue into three end markets: high-performance computing, or data center; communications; and consumer, which includes wireless charging.
During its fiscal third quarter, the communications market contributed 52% of IDT's overall revenue. The data center market came next at 37%, then consumer at 11%.
The data center end market was the biggest growth driver. Its revenue increased 41% sequentially, and the 37% of total revenue that it contributed was up from 29% the previous quarter.
The "great majority" of data center market growth is from high-performance memory interface components, Waters said. "These allow a microprocessor to access memory at least twice as fast as it could without using our components."
In the communications market, IDT's gains have benefited from favorable trends such as growth in wireless infrastructure and increasing 4G demand.
On a Q3 conference call with analysts, Waters said that IDT has moved into "new emerging applications" such as metropolitan area networks and cloud radio access networks, or C-RAN: "C-RAN is a newer cellular network architecture that will significantly improve the quality of real-time services over 4G networks such as video."
Meanwhile, IDT has seen accelerating sales in the consumer end market, thanks to rising demand for products such as its wireless charger ICs, used in wireless power transfer systems and in portable devices and accessories.
Wireless Charging Widens
Wireless charging for devices appears to be coming of age in the tech industry, with home furnishings retailer Ikea now even rolling out a line of furniture with built-in charging stations, the Wireless Power Consortium noted this month. Ikea's line features lamp bases, a desk and nightstand.
Also this month, IDT introduced Wireless PowerShare technology, which lets consumers wirelessly charge a mobile device from another device. It's touted for charging wearables by putting them on or near an enabled smartphone. Samsung has adopted an IDT wireless power transmitter to enable wireless charging for its Galaxy smartphone, IDT also said.
For its third quarter of fiscal 2015, IDT logged overall revenue of $151.2 million -- up 21% from a year earlier and well above both the high end of the company's guidance range and the consensus estimate of analysts in a Thomson Reuters poll.
"The revenue upside mainly came from stronger than anticipated demand from computing and a less than expected decline in consumer business," analyst Liwen Zhang of investment bank Blaylock Beal Van noted in a research report.
The strong revenue gain helped IDT grow its pro forma gross margin by 30 basis points from the prior quarter to 61.5% while its operating margin improved to 26%. The growth helped the company increase year-over-year earnings 47% to 25 cents a share.
For its fourth quarter, analysts polled by Thomson Reuters expect IDT to post a 33% sales gain to $157.9 million and an 86% EPS increase to 26 cents. Full-year profit is seen rising 78% to 89 cents a share. IDT's stock price touched a 12-and-a-half-year high of 21.45 in early February and currently trades near 21.
The company has a best-possible 99 IBD Composite Rating. It is one of the leaders of IBD's Electronics-Semiconductor Fabless group, which ranks No. 17 out of 197 industries tracked.
Other highly rated stocks in the industry group includeCavium (CAVM),Avago Technologies (AVGO),Ambarella (AMBA) andNXP Semiconductors (NXPI), which on Monday detailed plans to merge withFreescale Semiconductor (FSL).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
