Micrel Reports First Quarter Financial Results
Micrel, Inc. announced financial results for the first quarter ending March 31, 2008. First quarter revenues of $66.1 million increased 2% sequentially compared to fourth quarter 2007 revenues of $64.6 million and increased 5% compared to revenues of $63.1 million recorded in the year-ago period. According to the company, the increase in revenues was primarily due to stronger demand from the wire line communications, digital TV, industrial and voice-over-IP end markets.
First quarter GAAP net income was $8.4 million, or $0.12 per diluted share. This compares with fourth quarter 2007 GAAP net income of $8.4 million, or $0.11 per diluted share, and GAAP net income of $17.9 million or $0.23 per diluted share in the year ago period. Included in last year’s first quarter 2007 net income was a one-time $15.5 million pre-tax gain associated with a legal settlement, which after income taxes, was equivalent to $0.13 per diluted share.
First quarter 2008 non-GAAP net income was $9.1 million or $0.13 per diluted share. This compares to non-GAAP net income of $9.4 million, or $0.12 per diluted share in the previous quarter and $9.5 million, or $0.12 per diluted share in the first quarter of 2007. Non-GAAP results exclude the impact of revenues and cost of revenues related to intellectual property settlements, stock-based compensation expense, other operating income and expense items, restructuring expense and income, other income related to litigation settlements and their related tax effects.
"We are encouraged by the increased customer demand for Micrel’s products in the first quarter which enabled the company to record its highest level of quarterly revenues in the past eighteen months," stated Ray Zinn, President and CEO of Micrel. "First quarter order rates rebounded from fourth quarter levels across all geographies and sales channels resulting in a book-to-bill ratio well above one. Gross margin and diluted earnings per share also increased on a sequential basis and our investment in research and development continued to generate a growing number of new, high performance products. We continued to be focused on increasing shareholder value through our stock repurchase program and quarterly dividend payment. Micrel spent $17 million to repurchase 2.6 million shares of common stock during the first quarter and beginning this quarter, increased the quarterly dividend to $0.035 per common share to shareholders of record as of May 6, 2008."
During the first quarter, the company claims that it became engaged in its first proxy contest since going public in 1994 with a small activist hedge fund. Micrel believes this activist hedge fund is seeking to force consolidation in the semiconductor industry and has picked Micrel as its first target. It is claimed that this hedge fund is attempting to throw out Micrel’s Board of Directors and insert their own "inexperienced" nominees, whose "sole strategy" is to sell Micrel in the face of the "most challenging market conditions the industry has seen in years." This issue resulted in Micrel incurring an incremental $350,000 of operating expenses during the first quarter.
"The diversion of resources required to engage in this proxy contest, including incremental expenses and management’s time and energy, are significant and counterproductive," stated Zinn. "We are very focused on the bottom line and I am dismayed that we have to spend the company’s hard-earned money in this manner when it could be better utilized to grow the business."