SAN JOSE, Calif. -- Amid a loss for the quarter, Rubicon Technology Inc. is expanding. But is the company overextending itself?
Rubicon(Franklin Park, Ill.)--a developer of monocrystalline sapphire and other crystalline products for LEDs, RF, blue laser diodes, optoelectronics and other optical applications--disclosed plans to build two new facilities over the next 12 months.
''One facility will be in Illinois for boule growth. The second will be in Asia for both boule growth and large diameter wafer polishing,'' said Daniel Amir, an analyst with Lazard Capital Markets, in a report.
''We estimate the entire build-out could cost (greater than) $50 million, in excess of Rubicon's current cash levels ($45 million). Hence, it is likely Rubicon will tap the capital markets, which will likely dilute existing shareholders,'' he said.
''The new capacity will likely double Rubicon's existing capacity ($30-35 million annual revenue). While capacity expansion is due to strong LED demand, we also see an inherent risk of overextending the balance sheet and in the movement to polishing to potentially compete with its customers,'' he added.
Rubicon also said revenue increased $2.5 million sequentially to $5.7 million in the third quarter driven by increased sales into the LED market. Diluted loss per
share for the third quarter was $0.10 compared to $0.15 per share in the previous quarter.
In a statement, Raja Parvez, president and CEO, said: "The LED market continued to strengthen
in the third quarter and pricing of sapphire substrates stabilized in the quarter as global capacity for sapphire production began to tighten."
''The upside was driven primarily by better penetration of LED backlighting for notebooks and LCD TVs. LED revenue represented 83 percent of revenue and 2-inch wafers 67 percent,'' Amir said.
''ASP pressures ease and an increase is expected for 4Q. Pricing stabilized in 3Q as inventory levels at LED customers were cleared and demand was strong through the quarter. Solid demand from Taiwanese customers ( about 60 percent of revenue) in the LED space is driving demand for 2-inch wafers,'' the analyst said.
''Overall, wafer pricing is expected to increase about 7 percent in 4Q due to stable supply and improving demand. We expect large diameter sales could increase to about 50 percent of (the company's) revenue next year,'' he added.
Commenting on the outlook for the fourth quarter, William Weissman, Rubicon's CFO, said: "We estimate revenue for the fourth quarter will further improve to approximately $7.0 million. We expect pricing to begin to
increase in the fourth quarter and also expect to see an increase in the percentage of revenue from large diameter substrates. Based on the expected
pricing and mix, gross margin should turn positive with a reduction in diluted loss per share to approximately $0.05."
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