Thursday, June 18, 2009
(Cont'd from above)...

Jim (cont'd):   


Jim:       Mr. Bruggerworth, welcome to Mad Money...

Bob:     Hey, Jim, thanks for having us.

Jim:       My pleasure… I am sure because I know that you watch the show, I think that this 3G revolution is bigger than almost anything that I have ever seen in my years of following tech.. I do not think that enough is being made of it… this is your chance to tell me, no Jim, it is not as important as you think.

Bob:     Actually Jim, we think that it is as important as you think. And is something that we geared up for several years ago and we are very excited to be participating in this. And you have already commented about the current quarter and the growth that we are seeing in 3G along with some of the lower end segments. But absolutely this is happening and it is happening in broad base areas of the phone industry.

Jim:       Now, I do not mean to talk about something that I am sure that you have not even had a chance to look at… but Research, this is important to our viewers, Research In Motion reported a number that was not as good as people were hoping for… what I am trying to say that you cannot just look at one companies earnings… this is a transformational product, the way that the big computer came became the PC… and that we shouldn’t just look at one data point from one company, to throw away the whole 3G thesis… again, is that right?

Bob:     I believe that that is absolutely correct. And I think a lot of people underestimate a lot of the volume players, like Nokia and Samsung and their smart phones that are going on. In fact, I just returned from Asia last night and I have to tell you the 3G market is still doing extremely well, and it is the only growth segment that we are seeing in the handset industry for 2009.

Jim:       Can you tell people what China looks like vs. what you think it could look like 3 or 4 years from now with 3G?

Bob:     Absolutely, I mean what we are currently seeing right now is the strength obviously in the infrastructure market at the top players there. Where we are participating in TDSCDMA, wide band CDMA, along with CDMA, all three standards are being deployed. And you are just now starting to see the launch of new handsets with 3G smart phones. It is amazing to me how many phones are already available in China, that are being imported out of other countries. But obviously once the China carriers get behind it, we are going to see significant growth in 3G in China in the second half of the year.

Jim:       You are in Nokia and Samsung… are there design wins out there that you are competing out there for other players, or are those the two that you decided to make your big bet with?

Bob:     Clearly those are two of the larger players today. But we have content in several of the players that you have mentioned, the Palm Pre, the iPhone in the past, along with RIMM. But clearly what we are focused on are those players in 2010. We have really just released almost three times as many products in 2009 fiscal year, which ended in March, as we did the prior year. And those are the parts that are being designed. And it actually expands our content, as you have said, 3 to 5 times what we did in voice phones.

Jim:       Mr. Bruggerworth, can you describe to people, because I have followed your stock for years… I even followed the preferred that you issued… how are you able to get thru this trough? Because this has been one rough time for your company.

Bob:     It has been a quite challenging environment. I have to say first of all that our employees have really rose to the challenge and taken on every task that we have given them. But even thru this difficult period we have been able to generate about $85m in cash. And we did a lot of that by reducing our operating expenses and reducing our fixed manufacturing costs. So we are really positioned for significant financial leverage as we go forward and the supply chain digests this rate of change in the inventory. And now we are seeing that uplift, returning to more normalized levels in the supply change.

Jim:       One of the things that I think people are underestimating, there are numbers that I think are legitimate to toss around… something like it is possible that there could be a billion smart phones sold over the next two, three, four years. Is that outrageous?

Bob:     No, not at all. We absolutely would agree with that.

Jim:       Why do you think that I am having such a hard time convincing people that this is a real thesis… if you think back, I know that when Intel opened its first 286 plant… I remember Bob Noise telling me and some other people that this was going to revolutionize things…. and people at IBM laughed, and said that that was ridiculous, no one was ever going to pay up for a PC… he said they won’t have to, it is only going to cost a couple of hundred bucks… do you think people just do not see it, like they did not see what would happen with the PC?

Bob:     Well, I cannot anticipate why they do not see it. I can only tell you that we are already seeing it. And I think people are underestimating how much this phone has impacted peoples lives. And if you really look at the differences of a smart phone and your personal computer, a lot of people say that it is the size. I think one of the differences is the instant gratification when you turn it on you get access to the internet and you get access to your emails without having to wait for your computer to power up. And you carry your phone with you. And they are surprised, originally it was the business users. But now if you look at it, it is the students, to the housewives, to the grandparents, to the whole population. We all want to stay connected.

Jim:       Thank you Mr. Bruggerworth. That was Bob Bruggerworth, he is the CEO of RF Micro Devices Inc. (RFMD).
Thank you so much sir.

Bob:     Thank you so much for having us Jim.

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