MANHASSET, N.Y. With earnings a bit flat, International Rectifier Corp. is hoping that a plan to accelerate a transition to higher-margin products will bolster its bottom line.
In an interview with EE Times late Thursday following its earnings conference call, CEO Alex Lidow reaffirmed the company’s plans to sell its non-focused and commodity product businesses, accouting for $69 million or 23 percent of the company’s March quarter revenue of $297.1 million. Lidow said it was in discussions with several unnamed semiconductor and financial firms to sell its non-focus businesses, but declined to be specific.
At the same time, International Rectifier (El Segundo, Calif.) will accelerate expansion of its core, or focused product businesses, reopening a 200-mm fab in Newport, Wales, U.K. to produce semiconductors for rapidly-growing applications including digital TVs, servers, and game consoles.
"There’s tremendous growth opportunites," Lidow said, noting that its focused product businesses have been growing at a compound annual rate of 21 percent in recent quarters.
International Rectifier already has a 150-mm fab in Wales, but expects the 200-mm fab, shuttered during the industry downturn several years ago, to add much-needed capacity to help generate an additional $200 to $300 million of annual sales.
The non-focused and commodity businesses International Rectifier hopes to unload comprise a variety of semiconductor-related products serving the industrial, automotive, computers, and communications sectors, Lidow said. They have contributed to dragging down the company’s earnings in recent quarters.
Gross margin for non-focused products was 15.6 percent in the March quarter, down from 24.9 percent in the year-ago quarter. By contrast, gross margin for focused products was 47.7 percent in the March quarter, lifting overall gross margin to 40 percent.
In the March quarter, International Rectifier posted GAAP earnings of $25.7 million, or 36 cents per share, up slightly from $24.2 million or 34 cents per share the previous quarter, but down from $35.7 million, or 53 cents per share in the year-ago quarter.
To boost margins and earnings, International Rectifier is determined to unload its non-focused product business as soon as possible while reopening the Wales fab the second half of the year. The company expects both actions to help it reach its goal of attaining gross margin of 60 percent by the September quarter.
The near time will remain challenging for International Rectifier, however. For the June quarter, the company expects total sales to rise a modest 5 to 8 percent, with sales of focused products rising 7 to 9 percent. Gross margin will remain flat at 40 percent. The company declined to release earnings guidance.
Remaining undetermined is the fate of plants in four locations—China; India; Italy; and Swansea in Wales—that Lidow said produce the bulk of the non-focus and commodity product lines International Rectifier seeks to divest. He did not specify how many workers are employed in these plants.