Wall Street investors punished Sawtek Inc. late last month, sending the company’s stock down $11.25 to $53.75 per share after Qualcomm Inc. announced it had designed a new technology that would eliminate the need for one of Sawtek’s main products.
A Qualcomm release on Dec. 18 stated the company developed a new Zero Intermediate Frequency technology, radioOne, which Qualcomm said would reduce the size and manufacturing costs of CDMA radios. The release said the new technology would create a direct conversion architecture for wireless handsets, bypassing the need to convert radio frequency to or from intermediate frequency, then to convert intermediate frequency to or from baseband-which is the function of Sawtek’s intermediate frequency Surface Acoustic Wave filter.
Qualcomm’s release caused traders to pull the rug out from under Sawtek; its shares dropped 17 percent by the end of the day under a record amount of trading.
Sawtek executives moved quickly to stifle the panic by releasing a statement before the close of trading Dec. 18.
“It appears that the unusual trading activity in our stock today is attributed to a press released by Qualcomm issued today relating to a new technology,” said Raymond A. Link, Sawtek’s chief financial officer, in the statement.
Link pointed out that Qualcomm said it wouldn’t start sampling its new technology until the fourth quarter of the next calendar year.
“As a result of this delayed product sampling, Sawtek believes that the introduction of this new technology will have little or no impact on its revenues or profits for fiscal 2001.”
Sawtek executives also held a conference call the next day to ease investor concerns.
“We believe the near-term impact of this new technology to Sawtek is minimal,” Link said during the call. “Our plan is to continue to expand into other markets.”
Sales of the IF SAW filter accounted for 31 percent of Sawtek’s total sales last year. However, Link pointed out, 22 percent of this year’s sales were of IF SAW filters, which means the company is relying less and less on the product.
Link said Sawtek had been planning for the possibility of a company designing direct conversion architecture technology. In addition, he said Qualcomm’s new technology wouldn’t become accepted until after 2002, which gives Sawtek a full two years to move its profit source.
“We believe that our strategy is sound,” Link said. “Our company should continue to grow and prosper.”
Sawtek’s stock has since leveled out after this month’s tumultuous trading. Late last week, its stock was about $48 per share under light trading.
Sawtek designs, builds and markets signal processing components based on SAW technology for CDMA, GSM and wireless local area networks and cable TV equipment.
