Deal Info: 5.5M shares (97% primary) at a $15 mid-point = $82M IPO. Proposed market capitalization = $380M.
NASDAQ: PSMI planned pricing the week of August 6
Books: Deutsche Bank and JP Morgan with co-managers: RBC, Needham, Oppy and PacCrest.
Fabless semiconductor firm of 300 people in San Diego CA. Secret sauce is a special process called “Ultra CMOS” that can be used in advanced applications like RF. Positioned as a broad wireless play across many customers and end markets.
[So these guys grow at the expense of RFMD, ADI, ISIL, TXN, AVGO, MCOM, TQNT, SWKS?]
Growth strategy is taking more share from conventional multi-package RF front-end solutions in a growing market. In other words integration onto a single chip has big advantages. The company claims that their UltraCMOS platform offers greater efficiency and better integration of different RF functions. For example over Gallium Arsenide (GaAs) their component size has shrunk further and faster to be less than half the size of an equivalent GaAs component.
Digitally tunable 4G antennas are an opportunity where they are getting $.50 per unit now which can expand towards $1 in subsequent generations of product. Added to the antenna switch and 3G front-ends the total content per smartphone can approach $3/unit.
Strong emphasis on innovation and IP development with 125 patents granted/pending and hundreds of trade secrets.
Stable management team with industry backgrounds including TRW, Hughes, PMC, Schlumberger, Texas Instruments, Motorola, Northrop, Comsat and Unisys.
Revenues are up 73% YoY for the first half of 2012 and the company is at $160MM year revenue run rate. Customers are somewhat concentrated with one, Murata, making up a large (61%) and increasing portion. Murata distributes to multiple handset makers so the picture is more diverse than it appears.
Gross margins have reached 46% with a target model of 50%. Overall target for operating income is 15-22% which comes mostly from improved gross margin and lower SG&A costs as a percentage of revenue.
As a first look the deal looks solid with a valuation that is is supportable. Pending further analysis and our IV estimates we’d be inclined to participate.
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