EL SEGUNDO, CALIF. -- Despite an overall revenue picture that resembled last year's, International Rectifier Corp., based here, grew its fiscal 2005 revenues in energy-saving products by 20 percent from the previous year.
While International Rectifier's total annual revenues grew just $100-million over last fiscal year (from $1.06 billion in fiscal 2004 to $1.17 billion in fiscal 2005), the company's biggest growth was reflected in energy-saving products, followed by computer industry products and those for military and aerospace customers.
IR's Energy-Saving Products include variable speed motor controls in appliances and industrial systems, advanced lighting systems, automotive solutions and display lighting for plasma TVs. The growth in this area is driven by energy shortages, driving demand for greater efficiency, explained CEO Alex Lidow.
The worldwide expansion of the housing industry is increasing demand for energy-saving controllers and actuators in white goods and home appliances, Lidow explained. At the same time, developing economies such as China and India are driving the growth in IR's lighting business. The company's appliance and lighting revenues are up 41 percent in fiscal 2005.
Revenues in the ESP segment for fiscal 2005 were $300.5 million, up 20 percent from $250.8 million in the prior fiscal year. Gross margin was 55 percent compared to 49.2 percent for fiscal 2004 — and accounted for a 43 percent earnings (profit) growth for the company as a whole.
Other businesses where the company is doing well include computing servers and telecommunications switching centers, where the company supplies semiconductor components for point-of-load (POL) converters, including Pentium core voltage supplies. "We're experiencing a screaming growth in market share," Lidow enthused.
Products for military and aircraft applications similarly experienced a 19 percent growth, from $109 million in fiscal 2004 to $129 million in 2005.
Not everything does well
IR chose to breakout the revenues and earnings for its energy-saving products to highlight how well these contributed to overall margins of the company, Lidow explained. The company's commodity products business was down 15 percent from last year, from $331 million in 2004 to $317 million in fiscal 2005, affected by increased competition and downward pricing pressure. Margins here were about 24 percent.
"What you have is effectively two companies," Lidow said, stating his intentions to concentrate on higher margin businesses, even if it meant shrinking overall company revenues for a time. "One is a $850-million company with margins better than 51 percent. The other is a $300-million company — part of which will be for sale — whose margins are in 20's."
Lidow did not elaborate on what parts of his business were for sale or what the terms might be — only that "guidance" was suggesting a 4 percent revenue growth for the coming quarter. While a recovery was well underway, Lidow insisted, pricing pressures will push commodity revenues down another 2 percent. Up ticks in revenues, moreover, will be more likely reflected toward the "back end" of the quarter — September and the fall — rather than during the summer months.