================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
----------------
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the period ended December 28, 1997
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number: 0-24360
SPECTRIAN CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 77-0023003
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
350 West Java Drive
Sunnyvale, California 94089
(Address of principal executive offices)
Telephone Number (408) 745-5400
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
As of December 28, 1997 there were 10,754,724 shares of the Registrant's Common
Stock outstanding.
================================================================================
<PAGE>
SPECTRIAN CORPORATION
Form 10-Q
INDEX
Page
No.
Cover Page 1
Index 2
PART I - Financial Information
ITEM 1 - Condensed consolidated financial statements
Condensed consolidated balance sheets -
December 28, 1997 and March 31, 1997 3
Condensed consolidated statements of operations -
three and nine months ended December 28, 1997
and December 28, 1996 4
Condensed consolidated statements of cash flows -
nine months ended December 28, 1997 and
December 28, 1996 5
Notes to condensed consolidated financial statements 6
ITEM 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II - Other Information
ITEM 1 - Legal Proceedings 18
ITEM 2 - Changes in Securities and Use of Proceeds 18
ITEM 6 - Exhibits and Reports on Form 8-K 18
Signatures 19
2
<PAGE>
<TABLE>
SPECTRIAN CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<CAPTION>
December 28, March 31,
Assets 1997 1997
---------------- -------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,717 $ 6,240
Short-term investments 98,032 --
Accounts receivable, less allowance for doubtful
accounts of $373 and $365, respectively 34,373 15,825
Inventories 20,130 17,301
Prepaid expenses and other current assets 1,009 1,806
---------- ---------
Total current assets 156,261 41,172
Property and equipment, net 29,311 25,461
---------- ---------
$ 185,572 $ 66,633
========== =========
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of debt obligations $ 1,441 $ 1,588
Accounts payable 13,111 8,101
Accrued liabilities 10,877 7,421
---------- ---------
Total current liabilities 25,429 17,110
Debt obligations, net of current portion 6,239 7,057
---------- ---------
Total liabilities 31,668 24,167
---------- ---------
Stockholders' equity:
Common stock, $0.001 par value, 20,000,000 shares authorized;
10,754,724 and 8,265,230 shares issued and outstanding,
respectively 11 8
Additional paid-in capital 145,497 53,387
Unrealized gain on short-term investments 237 --
Retained earnings (accumulated deficit) 8,159 (10,929)
---------- ---------
Total stockholders' equity 153,904 42,466
---------- ---------
$ 185,572 $ 66,633
========== =========
<FN>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
</FN>
</TABLE>
3
<PAGE>
<TABLE>
SPECTRIAN CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
<CAPTION>
Three months ended Nine months ended
December 28, December 28,
--------------------------- -----------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 47,158 $ 24,485 $ 141,165 $ 56,680
Costs and expenses:
Cost of product sales 33,702 17,211 100,233 42,341
Research and development 5,074 4,773 13,455 12,836
Selling, general and administrative 3,429 2,293 9,936 6,620
--------- --------- --------- ---------
42,205 24,277 123,624 61,797
--------- --------- --------- ---------
Operating income (loss) 4,953 208 17,541 (5,117)
Interest income(expense), net 1,429 (70) 2,006 (395)
Other income, net -- -- 1,530 --
--------- --------- --------- ---------
Income (loss) before income taxes 6,382 (138) 21,077 (5,512)
Income tax expense -- -- 1,988 --
--------- --------- --------- ---------
Net income (loss) $ 6,382 $ 138 $ 19,089 $ (5,512)
========= ========= ========= =========
Net income (loss) per share
Basic $ 0.59 $ 0.02 $ 2.00 $ (0.68)
Diluted $ 0.56 $ 0.02 $ 1.83 $ (0.68)
Shares used in computing per share amounts:
Basic 10,744 8,169 9,531 8,105
Diluted 11,491 8,295 10,423 8,105
<FN>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
</FN>
</TABLE>
4
<PAGE>
<TABLE>
SPECTRIAN CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Nine months ended
December 28,
----------------------------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 19,089 $ (5,512)
Adjustments to reconcile net income (loss)
to net cash provided by (used for) operating activities:
Gain on sale of subsidiary (1,530) --
Depreciation and amortization 6,913 4,486
Stock option compensation expense -- 72
Tax benefit associated with stock options 1,378 --
Changes in operating assets and liabilities
Accounts receivable (19,281) 577
Inventories (4,405) (7,104)
Prepaid expenses and other assets 760 (272)
Accounts payable 5,796 1,666
Accrued liabilities 3,704 1,158
--------- ---------
Net cash provided by (used for) operating activities 12,424 (4,929)
--------- ---------
Cash flows from investing activities:
Purchase of short-term investments (102,843) --
Proceeds from sale of short-term investments 5,048 3,000
Purchase of property and equipment (11,639) (10,355)
Proceeds from sale of land, building and improvements -- 16,418
Proceeds from sale of subsidiary 4,016 --
--------- ---------
Net cash provided by (used for) investing activities (105,418) 9,063
--------- ---------
Cash flows from financing activities:
Repayment of debt (1,264) --
Proceeds from sales of Common Stock, net 90,735 910
--------- ---------
Net cash provided by financing activities 89,471 910
--------- ---------
Net increase (decrease) in cash and cash equivalents (3,523) 5,044
Cash and cash equivalents, beginning of period 6,240 1,163
--------- ---------
Cash and cash equivalents, end of period $ 2,717 $ 6,207
========= =========
<FN>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
</FN>
</TABLE>
5
<PAGE>
SPECTRIAN CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: Basis of Presentation
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles. However, certain information or
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of the management, the statements include all
adjustments (which are of a normal and recurring nature) necessary for the fair
presentation of the financial information set forth therein. These financial
statements should be read in conjunction with the Company's audited consolidated
financial statements as incorporated by reference in the Company's Form 10-K for
fiscal year ended March 31, 1997. The interim results presented herein are not
necessarily indicative of the results of operations that may be expected for the
full fiscal year ending March 31, 1998, or any other future period.
NOTE 2: Reincorporation
On September 11, 1997, the Company's shareholders approved the Company's
reincorporation in the state of Delaware, providing for 20,000,000 authorized
shares of Common Stock and 5,000,000 authorized shares of Preferred Stock, both
with par values of $.001 per share. On October 3, 1997, the reincorporation in
the state of Delaware was effected. The accompanying financial statements have
been restated to give effect to the reincorporation.
NOTE 3: Balance Sheet Components
Balance sheet components are as follows:
December 28, March 31,
1997 1997
------------- -----------
(In thousands
Inventories:
Raw materials $ 9,925 $ 9,315
Work in process 8,499 6,699
Finished goods 1,706 1,287
------- -------
$20,130 $17,301
======= =======
Property and equipment:
Machinery and equipment $44,877 $37,181
Land, building and improvements 2,822 2,813
Furniture and fixtures 1,376 1,382
Leasehold improvements 1,550 867
------- -------
50,622 42,246
Less accumulated depreciation and
amortization 21,311 16,785
------- -------
$29,311 $25,461
======= =======
6
<PAGE>
NOTE 3: Balance Sheet Components (continued)
December 28, March 31,
1997 1997
---------------- ---------------
(In thousands)
Accrued liabilities:
Employee compensation and benefits $ 4,098 $ 3,772
Warranty 5,140 1,940
Other accrued liabilities 1,639 1,709
----------- ----------
$ 10,877 $ 7,421
=========== ==========
NOTE 4: Short-Term Investments
The Company accounts for investments in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities". Under the provisions of SFAS No. 115, the Company
has classified its investments in certain debt securities as
"available-for-sale." Such investments are recorded at fair market value, with
unrealized gains and losses reported as a separate component of stockholders'
equity. Interest income is recorded using an effective interest rate, with the
associated premium or discount amortized to "Interest income, net."
As of December 28, 1997, short-term investments classified as available-for-sale
securities were as follows:
Unrealized Estimated
Cost Gains Fair Value
---------------------------------- --------
(In thousands)
Corporate debt securities 68,737 99 68,836
U.S. Government securities 29,058 138 29,196
-------------------------------------------
$ 97,795 $ 237 $ 98,032
-------------------------------------------
NOTE 5: Revenue Recognition
The Company recognizes product sales upon shipment and concurrently accrues for
expected warranty expenses. Repair and service revenues are recognized when the
service is performed.
NOTE 6: Earnings Per Share Computation
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings per Share" effective December 28, 1997. SFAS No. 128 requires the
presentation of basic earnings per share ("EPS") and, for companies with complex
capital structures [or potentially dilutive securities, such as convertible
debt, options and warrants], diluted EPS. The Company's earnings per share for
the three months and nine months ended December 28, 1996 have been restated for
the effects of SFAS No. 128.
Basic net income (loss) per share for the three and nine month periods ending
December 28, 1997 has been computed using the weighted average number of
outstanding shares of common stock. Diluted net income per share for the three
and nine month periods ending December 28, 1997 has been computed using the
weighted average number of outstanding shares of common stock and common
equivalent shares from stock options outstanding (when dilutive using the
treasury stock method). Using the treasury stock method, common stock options
are assumed to be exercised and the proceeds used to buy back common stock at
the Company's average stock price for the quarter ended December 28, 1997. Due
to the net loss incurred during the nine month periods
7
<PAGE>
ending December 28, 1996, common stock options outstanding would be antidilutive
and are therefore not included in the loss per share calculation for that
period.
<TABLE>
A reconciliation of the basic and diluted earnings per share calculations
follows:
<CAPTION>
Three Months Ended Nine Months Ended
December 28, 1997 December 28, 1997
-------------------------------- ----------------------------------
(In thousands except per share data) Per Share Per Share
Income Shares Amount Income Shares Amount
-------------------------------- ----------------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS $ 6,382 10,744 $ 0.59 $19,089 9,531 $2.00
Effect of dilutive securities 747 892
-------------------------------- ----------------------------------
Diluted EPS $ 6,382 11,491 $0.56 $19,089 10,423 $1.83
================================ ==================================
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 28, 1996 December 28, 1996
-------------------------------- ----------------------------------
(In thousands except per share data) Per Share Per Share
Income Shares Amount Income Shares Amount
--------- ---------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS $ 138 8,169 $ 0.02 $ (5,512) 8,105 $(0.68)
Effect of dilutive securities 126 --
-------------------------------- ----------------------------------
Diluted EPS $ 138 8,295 $0.02 $ (5,512) 8,105 $(0.68)
================================ ==================================
</TABLE>
NOTE 7: Legal Proceedings
Between December 23, 1997 and Febuary 3, 1998, four complaints were filed
against the Company and certain of its officers in the Federal Court for the
Northern District of California alleging violations of the federal securities
laws. The plaintiffs in these lawsuits purport to represent a class of persons
who purchased the Company's securities during the period of July 17, 1997
through October 23, 1997. The suits allege that the Company and certain of its
officers intentionally misled the investing public regarding the financial
prospects of the Company. The Company believes that the allegations are
completely without merit and will vigorously defend itself.
8
<PAGE>
SPECTRIAN CORPORATION AND SUBSIDIARY
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Certain statements in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" are "forward looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These forward
looking statements include, but are not limited to: the statements under
"Revenues" regarding future revenue growth, the statements in "Factors Affecting
Future Operating Results;" and the statements in the last paragraph under
"Liquidity and Capital Resources" regarding the anticipated spending for capital
additions in fiscal 1998 and beyond, and the sufficiency of the Company's
available resources to meet working capital and capital expenditure
requirements. The forward looking statements contained herein are based on
current expectations and entail various risks and uncertainties that could cause
actual results to differ materially from those expressed in such forward looking
statements, including those risks and uncertainties set forth below under
"Factors Affecting Future Operating Results."
Overview
The Company designs, manufactures and markets highly linear single
carrier and multicarrier radio frequency ("RF") power amplifiers that support a
broad range of worldwide analog and digital wireless transmissions standards,
including AMPS, TDMA, CDMA, TACS and GSM. The Company, founded in 1984 to
perform design and engineering services, first entered the commercial amplifier
market in 1988 and shipped its first cellular power amplifiers in 1990. The
Company's revenues are now derived primarily from sales to a limited number of
OEMs in the wireless infrastructure equipment market, in particular Northern
Telecom Limited ("Northern Telecom"). The Company has historically pursued a
strategy of vertical integration in its design and manufacturing processes,
including the establishment of a 3-inch wafer fabrication facility in 1985 and
the conversion to a 4-inch wafer fabrication facility to increase its capacity
in 1996. During the third quarter just ended, the Company outsourced some of its
higher volume printed circuit board sub-assemblies on a turnkey basis. The
Company anticipates it will continue using an outsourcing strategy wherever it
makes economic sense to do so.
During fiscal 1997, Northern Telecom and Nortel Matra Communications
("Nortel Matra"), in which Northern Telecom has an equity interest, accounted
for approximately 63% and 12% of revenues, respectively. During the three months
ended December 28, 1997, Northern Telecom, Nortel Matra, and LG Information and
Communications Limited ("LGIC") accounted for approximately 52%, 22% and 20% of
revenues, respectively. During the nine months ended December 28, 1997, Northern
Telecom, Nortel Matra and LGIC accounted for approximately 57%, 21% and 17% of
the Company's revenues. The Company's business, financial condition and results
of operations have been materially adversely affected in the past by anticipated
orders failing to materialize and by deferrals or cancellations of orders as a
result of changes in OEM requirements. If the Company were to lose Northern
Telecom or any other major OEM customer, or if orders by Northern Telecom or any
other major OEM customer were to otherwise materially decrease either in unit
quantity or in price, the Company's business, financial condition and results of
operations would be materially adversely affected.
The Company's vertical integration strategy entails a number of risks,
including a high level of fixed and variable costs, the management of complex
processes, dependence on a single source of supply and a strict regulatory
environment. During periods of low demand, high fixed wafer fabrication costs
are likely to have a material adverse effect on the Company's operations. In
addition, the Company's strategy of frequently introducing and rapidly expanding
the manufacture of new products to meet evolving OEM customer and service
provider needs has caused the Company to experience high materials and
manufacturing costs, including high scrap and material waste, significant
9
<PAGE>
material obsolescence, labor inefficiencies, high overtime hours, inefficient
material procurement and an inability to recognize economies of scale.
Results of Operations
<TABLE>
The following table sets forth for the periods indicated certain
statement of operations data of the Company expressed as a percentage of total
revenues and the gross margin on product sales.
<CAPTION>
Three Months Ended Nine Months Ended
December 28, December 28,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of product sales 71.5 70.3 71.0 74.7
Research and development 10.8 19.5 9.5 22.6
Selling, general and administrative 7.2 9.3 7.0 11.7
------ ------ ------ ------
Total costs and expenses 89.5 99.1 87.5 109.0
Operating income (loss) 10.5 0.9 12.5 (9.0)
Interest income (expense), net 3.0 (0.3) 1.4 (0.7)
Other income -- -- 1.0 --
------ ------ ------ ------
Income (loss) before income taxes 13.5 0.6 14.9 (9.7)
Income tax expense -- -- 1.4 --
------ ------ ------ ------
Net income (loss) 13.5% 0.6% 13.5% (9.7)%
====== ====== ====== ======
Gross margin on product sales 28.5% 29.7% 29.0% 25.3%
</TABLE>
Revenues. The Company's revenues increased by 93% to $47.2 million for
the three months ended December 28, 1997 from $24.5 million for the three months
ended December 28, 1996. The Company's revenues increased by 149% to $141.2
million for the nine months ended December 28, 1997 from $56.7 million for the
nine months ended December 28, 1996. The sizable increase in revenues for the
three months ended December 28, 1997 reflects a significant increase in demand,
primarily by Northern Telecom, for the Company's second generation GSM and
multicarrier products, single carrier TDMA product and Korean PCS CDMA product.
In addition to the products listed above, the increase in revenues for the nine
months ended December 28, 1997 as compared to the nine months ended December 28,
1996, also reflects below normal customer demand experienced in the first
quarter of fiscal 1997 ended June 29, 1996. Although the Company's future
revenue is difficult to predict, the Company believes that the recent
significant percentage growth in revenues will not be sustainable and that
fiscal 1999 growth in revenues, if any, will be slight.
Cost of Product Sales. Cost of product sales consists primarily of raw
materials, RF semiconductor fabrication costs, amplifier assembly and test
costs, overhead and warranty costs. The Company's cost of product sales
increased by 95.8% to $33.7 million for the three months ended December 28, 1997
from $17.2 million for the three months ended December 28, 1996. Included in the
cost of product sales were costs associated with the rapid increase in
manufacturing volume for new products and costs associated with discontinuing
older products. Gross margin on product sales was 28.5% for the three months
ended December 28, 1997 as compared to 29.7% for the three months ended December
28, 1996. The Company's cost of product sales increased by 136.7% to $100.2
million for the nine months ended December 28, 1997 from $42.3 million for the
nine months ended December 28, 1996. Gross margin on product sales was 29.0% for
the nine months ended December 28, 1997 as compared to 25.3% for the nine months
ended December 28, 1996. The improvement in product gross margin for the nine
months ended December 28, 1997 primarily reflects the benefits of spreading
fixed manufacturing overhead spending over a larger number of units sold.
10
<PAGE>
Research and Development. Research and development ("R&D") expenses
include the cost of designing, developing or reducing the manufacturing cost of
amplifiers and RF semiconductors. The Company's R&D expenses increased by 6.3%
to $5.1 million in the three months ended December 28, 1997 from $4.8 million in
the three months ended December 28, 1996. R&D spending in the three months ended
December 28, 1996 included development costs for the Company's 4-inch wafer
fabrication facility. The increase in R&D spending in the three months ended
December 28, 1997 reflects the absence of these facility development costs but
was offset by increased overall R&D spending, primarily for personnel and
related expenses. R&D expenses as a percentage of revenues decreased to 10.8% in
the three months ended December 28, 1997 from 19.5% for the three months ended
December 28, 1996, reflecting the substantially higher revenue levels in the
three months ended December 28, 1997. The Company's R&D expenses increased by
4.8% to $13.5 million in the nine months ended December 28, 1997 from $12.8
million in the nine months ended December 28, 1996. The increase in R&D spending
in the nine months ended December 28, 1997 reflects increased spending in both
amplifier and semiconductor R&D for personnel expenses and project development
expenses but was offset in part by facility development costs incurred in the
nine month period ended December 28, 1996. R&D expenses as a percentage of
revenues decreased to 9.5% in the nine months ended December 28, 1997 from 22.6%
for the nine months ended December 28, 1996, reflecting the significantly higher
revenue levels in the nine months ended December 28, 1997.
Selling, General and Administrative. Selling, general and
administrative ("SG&A") expenses include compensation and benefits for sales,
marketing, senior management and administrative personnel, commissions paid to
independent sales representatives, professional fees and other expenses. The
Company's SG&A expenses increased by 49.5% to $3.4 million for the three months
ended December 28, 1997 from $2.3 million for the three months ended December
28, 1996. SG&A expenses as a percentage of revenues decreased to 7.2% for the
three months ended December 28, 1997 from 9.3% for the three months ended
December 28, 1996. The Company's SG&A expenses increased by 50.1% to $9.9
million for the nine months ended December 28, 1997 from $6.6 million for the
nine months ended December 28, 1996. SG&A expenses as a percentage of revenues
decreased to 7.0% for the nine months ended December 28, 1997 from 11.7% for the
nine months ended December 28, 1996. The increase in SG&A expenses for both
periods was primarily due to outside commissions paid for South Korean sales,
increases in sales and administrative headcount, and to a lesser extent the
maintenance of a South Korean sales support office. The decrease of SG&A
expenses as a percentage of sales in both periods was a result of the
substantially higher revenue levels in those periods.
Interest Income (Expense), net. Interest income, net for the three
months ended December 28, 1997 was $1.4 million compared to net interest expense
of $69,000 for the three months ended December 28, 1996. Interest income, net
for the nine months ended December 28, 1997 was $2.0 million compared to net
interest expense of $395,000 for the nine months ended December 28, 1996. The
increase in net interest income was the result of interest income earned on
substantially higher cash balances and short-term investments reflecting
primarily the investment of the proceeds of the Company's August 1997 public
offering.
Income Taxes. The Company did not record an income tax expense for the
three months ended December 28, 1997. As of the nine months ended December 28,
1997, the Company had recorded income tax expense of $2.0 million which the
Company believes will be sufficient to cover its fiscal 1998 income tax
provision. The combined effective tax rate of 9.4%, for the nine months ended
December 28, 1997, reflects the use of net operating loss carryforwards
("NOLs"). The Company's ability to use its NOLs against taxable income may be
subject to restrictions and limitations under Section 382 of the Internal
Revenue Code of 1986, as amended, in the event of a change in ownership of the
Company as defined therein.
Factors Affecting Future Operating Results
Customer Concentration; Dependence on Northern Telecom. The wireless
infrastructure equipment market is dominated by a small number of large original
equipment manufacturers ("OEMs"), including LM Ericsson Telephone Company
("Ericsson"), Lucent Technologies, Inc. ("Lucent"), Motorola Corporation
("Motorola"), Northern Telecom, Nortel Matra, and Siemens AG ("Siemens"). The
Company's revenues are derived primarily from sales to a limited number of these
OEMs. During the three months ended December 28, 1997, Northern Telecom, Nortel
Matra and LGIC accounted for approximately 52%, 22% and 20% of the Company's
revenues, respectively. Northern Telecom,
11
<PAGE>
Nortel Matra and LGIC accounted for approximately 57%, 21% and 17% of the
Company's revenues during the nine months ended December 28,1997. Furthermore, a
substantial portion of revenues from Northern Telecom and Nortel Matra in the
three and nine months ended December 28, 1997 resulted from sales of a limited
number of the Company's products. The Company's top five customers accounted for
97% of its sales for the three and nine months ended December 28, 1997. The
Company, Northern Telecom and Nortel Matra have an agreement, renegotiated
annually, pursuant to which Northern Telecom and Nortel Matra commit to purchase
a certain volume of their annual power amplifier requirements for specified
prices from the Company. The renewal of the Company's agreement with Northern
Telecom and Nortel Matra for calendar year 1998 was finalized in October 1997.
Based on lower RF amplifier volume commitments and reduced pricing contained in
this agreement and other factors, the Company expects that the Company's recent
significant growth in revenues will not be sustainable and that fiscal 1999
revenue growth, if any, will be slight. In addition, there can be no assurance
that Northern Telecom and Nortel Matra will enter into a contract as favorable
to the Company, if any, in the future or otherwise agree to purchase the same or
similar levels of their power amplifier requirements from the Company or
purchase their power amplifier requirements at the same or similar pricing. Any
reduction in the level of purchases of the Company's amplifiers by Northern
Telecom and Nortel Matra, or any material reduction in pricing without
significant offsets, would have a material adverse effect on the Company's
business, financial condition and results of operations. Further, if the Company
were to lose Northern Telecom or any other major OEM customer, or if orders by
Northern Telecom or any other major OEM customer were to otherwise materially
decrease, the Company's business, financial condition and results of operations
would be materially adversely affected. In addition, the recent financial market
turmoil and economic downturn in Korea may have a material adverse effect on the
Company's sales of its products to LGIC, an OEM based in Korea, because a
majority of the Company's products ordered by LGIC to date relate to the
build-out of the Korean PCS system. In addition, because the Company's products
are priced in U.S. dollars, the currency instability in the Korean and other
Asian financial markets may have the effect of making the Company's products
more expensive to LGIC than those of other manufacturers whose products are
priced in one of the affected Asian currencies, and, therefore, LGIC may reduce
future purchases of the Company's products. In addition, wireless infrastructure
equipment OEMs have come under increasing price pressure from wireless service
providers, which in turn has resulted in downward pricing pressure on the
Company's products. The Company expects to incur increasing pricing pressures
from Northern Telecom and other major OEM customers in future periods which will
result in declining average sales prices for the Company's products.
Fluctuations in Operating Results. The Company's quarterly and annual
results have in the past been, and will continue to be, subject to significant
fluctuations due to a number of factors, any of which could have a material
adverse effect on the Company's business, financial condition and results of
operations. In particular, the Company's results of operations are likely to
vary due to the timing, cancellation, delay or rescheduling of OEM customer
orders and shipments; the timing of announcements or introductions of new
products by the Company, its competitors or their respective OEM customers; the
acceptance of such products by wireless equipment OEMs and their customers;
relative variations in manufacturing efficiencies, yields and costs; competitive
factors such as the pricing, availability, and demand for competing
amplification products; changes in average sales prices and product mix;
variations in operating expenses; changes in manufacturing capacity and
variations in the utilization of this capacity; shortages of key supplies; the
long sales cycles associated with the Company's customer specific products; the
timing and level of product and process development costs; changes in inventory
levels; and most recently, the relative strength or weakness of international
financial markets. Anticipated orders from the Company's OEM customers have in
the past failed to materialize and delivery schedules have been deferred or
canceled as a result of changes in OEM customer requirements and the Company
expects this pattern to continue as customer requirements continue to change and
industry standards continue to evolve. Reduced demand for wireless
infrastructure equipment in the latter part of fiscal 1996 and the early part of
fiscal 1997, driven partly by delays in the build-out of PCS infrastructure,
caused significant fluctuations in the Company's product sales during that
period of time. There can be no assurance that the Company will not experience
such fluctuations in the future and, in fact, the Company anticipates lower
product revenues over the next two to three quarters as a result of softening
demand in the TDMA markets and delays in Korean PCS demand due to the unstable
Asian financial markets and general economic conditions in Korea and other Asian
countries. The Company establishes its expenditure levels for product
development and other operating expenses based on its expected revenues, and
expenses are relatively fixed in the short term. As a result, variations in
timing of revenues can cause significant variations in quarterly results of
operations. There can be no assurance that the Company will be profitable on a
quarter-to-quarter basis in the future. The Company believes that period to
period comparisons of its financial results are not necessarily meaningful and
should not be relied upon as an indication of future performance. Due to all
12
<PAGE>
the foregoing factors, it is likely that in some future quarter or quarters the
Company's revenues or operating results will not meet the expectations of public
stock market analysts or investors. In such event, the market price of the
Company's Common Stock would be materially adversely affected.
Internal Amplifier Design and Production Capabilities of OEMs. The
Company believes that a majority of the present worldwide production of power
amplifiers is captive within the manufacturing operations of wireless equipment
OEMs, many of which have chosen not to purchase amplifiers from outside
suppliers. The Company also believes that OEMs who purchase from third party
amplifier vendors are reluctant to switch once committed to a particular
merchant vendor. Consequently, the Company has only limited opportunities to
increase revenues by replacing internal OEM amplifier production or displacing
other merchant amplifier suppliers. Moreover, given the limited opportunities
for merchant RF amplifier suppliers, any decision by an OEM to employ a second
source merchant supplier for a product currently purchased from a merchant
supplier may reduce the existing merchant supplier's ability to maintain a given
level of product sales to such OEM or, possibly, to retain the OEM as a customer
due to price competition from the second source merchant supplier. There can be
no assurance that the Company's major OEM customers will continue to rely, or
increase their reliance, on the Company as an external source of supply for
their power amplifiers, or that other wireless equipment OEMs will become
customers of the Company. If the major wireless infrastructure equipment
suppliers do not purchase or continue to purchase their power amplifiers from
merchant suppliers, the Company's business, results of operations and financial
condition will be materially adversely affected.
Rapid Technological Change; Evolving Industry Standards; Dependence on
New Products. The markets in which the Company and its OEM customers compete are
characterized by rapidly changing technology, evolving industry standards and
continuous improvements in products and services. In particular, because the
Company's strategy of rapidly bringing to market products customized for
numerous and evolving RF modulation standards requires developing and achieving
volume production of a large number of distinct products, the Company's ability
to rapidly design and produce individual products for which there is significant
OEM customer demand will be a critical determinant of the Company's future
success. For example, continued softening of demand in the TDMA market or
failure of another modulation standard in which the Company has invested
substantial development resources may have a material adverse effect on the
Company's business, financial condition and results of operations. No assurance
can be given that the Company's product development efforts will be successful,
that its new products will meet customer requirements and be accepted or that
its OEM customers' product offerings will achieve customer acceptance. If a
significant number of development projects do not result in significant volume
production or if technologies or standards supported by the Company's or its
customers' products become obsolete or fail to gain widespread commercial
acceptance, the Company's business may be materially adversely affected.
Risks Associated with Internal Wafer Fabrication. The Company's
operation of its wafer fabrication facilities entails a number of risks,
including a high level of fixed and variable costs, the management of complex
processes, dependence on a single source of supply and a strict regulatory
environment. During periods of low demand, high fixed wafer fabrication costs
are likely to have a material adverse effect on the Company's results of
operations. The design and fabrication of RF semiconductors is a complex and
precise process. Such manufacturing is sensitive to a wide variety of factors,
including variations and impurities in the raw materials, difficulties in the
fabrication process, performance of the manufacturing equipment, defects in the
masks used to print circuits on a wafer and the level of contaminants in the
manufacturing environment. As a result of these and other factors, semiconductor
manufacturing yields from time to time in the past have suffered, and there can
be no assurance that the Company will be able to achieve acceptable production
yields in the future. In addition, the Company's wafer fabrication facility
represents a single point of failure in its manufacturing process that would be
costly and time-consuming to replace if its operation were interrupted. The
interruption of wafer fabrication operations or the loss of employees dedicated
to the wafer fabrication facility could have a material adverse effect on the
Company's business, financial condition and results of operations. Any failure
to maintain acceptable wafer production levels, either from the Company's
facility or from a third party wafer supplier, will have a material adverse
effect on the Company's business, financial condition and results of operations.
Product Quality, Performance and Reliability. The Company expects that
its customers will continue to establish demanding specifications for quality,
performance and reliability that must be met by the Company's products. RF
semiconductors as complex as those offered by the Company often encounter
development delays and may contain undetected defects or failures when first
introduced or after commencement of commercial shipments. The Company
13
<PAGE>
has from time to time in the past experienced product quality, performance or
reliability problems. In addition, multicarrier power amplifiers have a higher
probability of malfunction because of their greater complexity. There can be no
assurance that defects or failures will not occur in the future relating to the
Company's product quality, performance and reliability that may have a material
adverse effect on the Company's business, financial condition and results of
operations.
Sole or Limited Sources of Materials and Services. The Company
currently procures from single sources certain components and services for its
products including cast housings, printed circuit boards, specialized RF
components and specialized sub-assemblies. The Company purchases these
components and services on a purchase order basis, does not carry significant
inventories of these components and does not have any long-term supply contracts
with its sole source vendors. Although the Company is currently identifying
potential alternative sources of these components, its reliance on sole sources
entails certain risks, including reduced control over the price, timely
delivery, reliability and quality of the components. If the Company were to
change any of its sole source vendors, the Company would be required to
requalify the components with each new vendor. Any inability of the Company to
obtain timely deliveries of components of acceptable quality in required
quantities or a significant increase in the prices of components for which the
Company does not have alternative sources could materially adversely affect the
Company's business, financial condition and results of operations. The Company
has occasionally experienced difficulties in obtaining these components, and no
assurance can be given that shortages will not occur in the future.
Declining Average Sales Prices. The Company has experienced, and
expects to continue to experience, declining average sales prices for its
products. Wireless infrastructure equipment manufacturers have come under
increasing price pressure from wireless service providers, which in turn has
resulted in downward pricing pressure on the Company's products. In addition,
competition among merchant suppliers has increased the downward pricing pressure
on the Company's products. Since wireless infrastructure equipment manufacturers
frequently negotiate supply arrangements far in advance of delivery dates, the
Company often must commit to price reductions for its products before it is
aware of how, or if, cost reductions can be obtained. To offset declining
average sales prices, the Company believes that it must achieve manufacturing
cost reductions. If the Company is unable to achieve such cost reductions, the
Company's gross margins will decline, and such decline will have a material
adverse effect on the Company's business, financial condition and results of
operations.
Risks of International Sales. Sales outside of the United States were
73% and 94% of revenues in fiscal 1997 and the nine months ended December 28,
1997, respectively. The Company expects that international sales will continue
to account for a significant percentage of the Company's total revenues for the
foreseeable future. These sales involve a number of inherent risks, including
imposition of government controls, currency exchange fluctuations, potential
insolvency of international distributors and representatives or customers,
reduced protection for intellectual property rights in some countries, the
impact of recessionary environments in economies outside the United States,
political instability and generally longer receivables collection periods, as
well as tariffs and other trade barriers. In addition, because substantially all
of the Company's foreign sales are denominated in U.S. dollars, increases in the
value of the dollar relative to the local currency would increase the price of
the Company's products in foreign markets and make the Company's products
relatively more expensive and less price competitive than competitors' products
that are priced in local currencies. There can be no assurance that these
factors will not have a material adverse effect on the Company's future
international sales and, consequently, on the Company's business, financial
condition and results of operations. The Company anticipates that the recent
turmoil in Asian financial markets and the recent deterioration of the
underlying economic conditions in certain Asian countries may have an impact on
its sales to customers located in or whose projects are based in those countries
due to the impact of currency fluctuations on the relative price of the
Company's products and restrictions on government spending imposed by the
International Monetary Fund (the "IMF") on those countries receiving the IMF's
assistance. In addition, customers in those countries may face reduced access to
working capital to fund component purchases, such as the Company's products, due
to higher interest rates, reduced bank lending due to contractions in the money
supply or the deterioration in the customer's or its bank's financial condition
or the inability to access local equity financing. A substantial majority of the
Company's products are sold to OEMs who incorporate the Company's products into
systems sold and installed to end-user customers. These OEMs are not required by
contract and do not typically provide the Company with information regarding the
location and identity of their end-user customers, and, therefore, the Company
is not able to determine what portion of its product sales have been or future
orders will be incorporated into OEM sales to end-users in those Asian countries
currently experiencing financial market turmoil and/or deterioration of economic
conditions. Furthermore, a large
14
<PAGE>
portion of the Company's existing customers and potential new customers are
servicing new markets in developing countries that the Company's customers
expect will deploy wireless communication networks as an alternative to the
construction of a wireline infrastructure. If such countries decline to
construct wireless communication systems, or construction of such systems is
delayed for any reason, including business and economic conditions and changes
in economic stability due to factors such as increased inflation and political
turmoil, such delays could have a material adverse effect on the Company's
business, results of operations and financial condition.
Reliance upon Growth of Wireless Services. Sales of power amplifiers to
wireless infrastructure equipment suppliers have in the past accounted, and are
expected in the future to account, for substantially all of the Company's
product sales. Demand for wireless infrastructure equipment is driven by demand
for wireless service. Although demand for power amplifiers has grown in recent
years, if demand for wireless services fails to increase or increases more
slowly than the Company or its OEM customers currently anticipate, the Company's
business, financial condition and results of operations would be materially and
adversely affected.
Market for the Company's Products Is Highly Competitive. The wireless
communications equipment industry is extremely competitive and is characterized
by rapid technological change, new product development and product obsolescence,
evolving industry standards and significant price erosion over the life of a
product. The ability of the Company to compete successfully and sustain
profitability depends in part upon the rates at which wireless equipment OEMs
incorporate the Company's products into their systems and the Company captures
market share from other merchant suppliers. The Company's major OEM customers,
including Northern Telecom, Nortel Matra, LGIC and QUALCOMM, continuously
evaluate whether to manufacture their own amplification products or purchase
them from outside sources. There can be no assurance that these OEM customers
will incorporate the Company's products into their systems or that in general
they will continue to rely, or expand their reliance, on external sources of
supply for their power amplifiers. The Company's principal competitors in the
market for wireless amplification products provided by merchant suppliers
currently include AML Communications, Hewlett-Packard Wireless Infrastructure
Division, Microwave Power Devices, NEC Corporation and Powerwave Technologies.
No assurance can be given that the Company's competitors will not develop new
technologies or enhancements to existing products or introduce new products that
will offer superior price or performance features compared to the Company's
products.
Uncertain Protection of Intellectual Property. The Company's ability to
compete successfully and achieve future revenue growth will depend, in part, on
its ability to protect its proprietary technology and operate without infringing
the rights of others. The Company has a policy of seeking patents on inventions
resulting from its ongoing research and development activities. The Company has
been awarded 15 United States patents, and has 20 United States patent
applications pending including three that have been allowed but not yet formally
issued. The Company also has been awarded six foreign patents and has ten
foreign patent applications pending. There can be no assurance that the
Company's pending patent applications will be allowed or that the issued or
pending patents will not be challenged or circumvented by competitors. The
failure of the Company to protect its proprietary technology could have a
material adverse effect on its business, financial condition and results of
operations.
Risk of Third Party Claims of Infringement. The communications
equipment industry is characterized by vigorous protection and pursuit of
intellectual property rights or positions, which have resulted in significant
and often protracted and expensive litigation. Although there is currently no
pending intellectual property litigation against the Company, the Company or its
suppliers may from time to time be notified of claims that the Company may be
infringing patents or other intellectual property rights owned by third parties.
In the event that any third party makes a successful claim against the Company
or its customers and either a license is not made available to the Company on
commercially reasonable terms or a "design around" is not practicable, the
Company's business, financial condition and results of operations would be
materially adversely affected
Government Regulation of Communications Industry. Radio frequency
transmissions and emissions, and certain equipment used in connection therewith,
are regulated in the United States, Canada and throughout the rest of the world.
Regulatory approvals generally must be obtained by the Company in connection
with the manufacture and sale of its products, and by wireless service providers
to operate the Company's products. If more stringent RF emission regulations are
adopted, the Company and its OEM customers may be required to alter the manner
in which radio signals are transmitted or otherwise alter the equipment
transmitting such signals, which could materially adversely affect the Company's
products and markets. The enactment by federal, state, local or international
governments of new
15
<PAGE>
laws or regulations or a change in the interpretation of existing regulations
could also materially adversely affect the market for the Company's products.
Environmental Regulations. The Company is subject to a variety of
local, state and federal governmental regulations relating to the storage,
discharge, handling, emission, generation, manufacture and disposal of toxic or
other hazardous substances used to manufacture the Company's products. The
Company believes that it is currently in compliance in all material respects
with such regulations and that it has obtained all necessary environmental
permits to conduct its business. Nevertheless, the failure to comply with
current or future regulations could result in the imposition of substantial
fines on the Company, suspension of production, alteration of its manufacturing
processes or cessation of operations. Any failure by the Company to control the
use, disposal, removal or storage of, or to adequately restrict the discharge
of, or assist in the cleanup of, hazardous or toxic substances, could subject
the Company to significant liabilities, including joint and several liability
under certain statutes. The imposition of such liabilities could materially
adversely affect the Company's business, financial condition and results of
operations.
Management of Growth; Dependence on Key Personnel. The growth in the
Company's business has placed, and is expected to continue to place, a
significant strain on the Company's personnel, management and other resources.
The Company's ability to manage any future growth effectively will require it to
attract, train, motivate, manage and retain new employees successfully, to
integrate new employees into its overall operations, to retain the continued
service of its key technical, marketing and management personnel, and to
continue to improve its operational, financial and management information
systems. Although the Company has employment contracts with several of its
executive officers, these agreements do not obligate such individuals to remain
in the employment of the Company. The Company does not maintain key man life
insurance on any of its key technical personnel. The competition for such
personnel is intense, and the loss of key employees could have a material
adverse effect on the Company.
Volatility of Stock Price. The market price of the shares of Common
Stock has recently been and is likely to continue to be highly volatile. During
the third fiscal quarter of 1998, the Company's closing stock price ranged from
a high of $64.875 to a low of $16.875. The Company's stock price is affected
significantly by factors such as fluctuations in the Company's operating
results, announcements of technological innovations, new customer contracts or
new products by the Company or its competitors, announcements by the Company's
customers regarding their business or prospects, changes in analysts'
expectations, governmental regulatory action, developments with respect to
patents or proprietary rights, general market conditions and other factors. In
addition, the stock market has from time to time experienced significant price
and volume fluctuations that are unrelated to the operating performance of
particular companies.
Pending Litigation. Between December 23, 1998 and Febuary 3, 1998, four
complaints were filed against the Company and certain of its officers in the
Federal Court for the Northern District of California alleging violations of the
federal securities laws. The plaintiffs in these lawsuits purport to represent a
class of persons who purchased the Company's securities during the period of
July 17, 1997 through October 23, 1997. The suits allege that the Company and
certain of its officers intentionally misled the investing public regarding the
financial prospects of the Company. The Company believes that the allegations
are completely without merit and will vigorously defend itself. Certain
provisions of the Company's Certificate of Incorporation and indemnification
agreements between the Company and its officers require the Company to advance
to such officers ongoing legal expenses of defending the suits and may require
the Company to indemnify them against judgments rendered on certain claims. The
Company expects to incur significant legal expenses on its behalf and behalf of
such officers in connection with this litigation. In addition, defending this
litigation has resulted and will likely continue to result in the diversion of
management's attention from the day-to-day operations of the Company's business.
Although the Company does not believe that it or any of its officers has engaged
in any wrongdoing, there can be no assurance that this stockholder litigation
will be resolved in the Company's favor. An adverse result, settlement or
prolonged litigation could have a material adverse effect on the Company's
business, financial condition or results of operations.
Liquidity and Capital Resources
The Company has financed its growth through its initial public offering
in August 1994, a recent public equity offering in August 1997 and through
private sales of equity securities, capital equipment leases, bank lines of
credit and
16
<PAGE>
cash flows from operations. Cash provided by operations was $11.8 million for
the nine months ended December 28, 1997 while cash used by operations in the
corresponding period of fiscal 1997 was $4.9 million. The cash provided by
operations for the nine months ended December 28, 1997 was principally generated
by the Company's profits over the nine month period. The cash used by operations
in fiscal 1997 was principally for purchasing inventory to support production
growth for increasing product shipment volumes.
As of December 28, 1997, the Company had working capital of $130.2
million including $100.7 million in cash, cash equivalents and short-term
investments. In addition, the Company has a revolving line of credit of $10.0
million with a bank secured by the majority of the Company's assets. Under the
terms of the master agreement governing this credit instrument, the Company is
required to maintain certain minimum working capital, net worth, profitability
and other specific financial ratios. As of December 28, 1997, the Company was in
compliance with these financial covenants. There were no borrowings outstanding
against this line of credit as of December 28, 1997.
In January 1997, the Company borrowed $6.0 million under a term loan
secured by certain capital equipment. The loan, which expires in January 2002,
requires the payment of monthly principal plus interest and is subject to
certain minimum working capital, net worth and other specific financial ratios.
The Company was in compliance with these covenants as of December 28, 1997. In
March 1997, the Company also secured a $3.2 million real estate loan, which
expires in April 2007, for the purchase of a light industrial building for its
future facilities expansion.
Additions to property and equipment were $11.6 million for the nine
months ended December 28, 1997 and $16.3 million in fiscal 1997. Capital
additions for the first nine months of fiscal 1998 included the purchase of new
corporate management information systems software, manufacturing test and
production equipment required to support new products and increase factory
capacity, and test equipment to support various research and development
projects.
The Company anticipates spending approximately $18 million over the
next 12 months for capital additions primarily to support manufacturing capacity
requirements, development projects and facilities expansion. Based on the
Company's current working capital position, the cash flows the Company expects
to generate from fiscal 1998 operations and the available line of credit the
Company expects to renew, the Company believes that sufficient resources will be
available to meet the Company's cash requirements for at least the next twelve
months. Cash requirements for periods beyond the next twelve months depend on
the Company's profitability, timing and level of capital expenditures, working
capital requirements and rate of growth.
17
<PAGE>
PART II - OTHER INFORMATION
ITEM 1: Legal Proceedings
Between December 23, 1997 and Febuary 3, 1998, four complaints were
filed against the Company and certain of its officers in the Federal Court for
the Northern District of California alleging violations of the federal
securities laws. The plaintiffs in these lawsuits purport to represent a class
of persons who purchased the Company's securities during the period of July 17,
1997 through October 23, 1997. The suits allege that the Company and certain of
its officers intentionally misled the investing public regarding the financial
prospects of the Company. The Company believes that the allegations are
completely without merit and will vigorously defend itself.
ITEM 2: Changes in Securities and Use of Proceeds
(a) On October 3, 1997, the Company affected a reincorporation in
Delaware. The Certificate of Incorporation and Bylaws of the surviving Delaware
corporation were approved by the stockholders of the Company on September 11,
1997.
(b) Not applicable.
(c) Between September 28, 1997 and December 28, 1997, the Company
issued options to purchase an aggregate of 25,000 shares of Common Stock to one
employee at an exercise price of $17.625 per share pursuant to Non-Qualified
Stock Option Agreements.
The sale of the above securities were deemed to be exempt from
registration under the Securities Act of 1933, as amended (the "Securities
Act"), in reliance on Section 4(2) of the Securities Act, Regulation D
promulgated thereunder, or Rule 701 promulgated under Section 3(b) of the
Securities Act, as transactions not involving a public offering or transactions
pursuant to compensatory benefit plans and contracts relating to compensation as
provided under Rule 701. The recipient had adequate access, through his
relationship with the Company, to information about the Company.
(d) Not applicable.
ITEM 6: Exhibits and Reports on Form 8-K
(a) Exhibits
11.1 Statement regarding computation of net income (loss) per share
27.1 Financial Data Schedule
(b) On October 10, 1997 the Company filed a Report on Form 8-K
regarding the effectiveness of its reincorporation in Delaware on October 3,
1997 and filing the Delaware corporation's certificate of incorporation,
bylaws, form of indemnification agreement and the merger agreement used to
affect the reincorporation.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: February 3, 1998
SPECTRIAN CORPORATION
(Registrant)
/S/ BRUCE R. WRIGHT
----------------------------------------------------
Bruce R. Wright
Executive Vice President, Finance and Administration,
Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)
19
Exhibit 11.1
<TABLE>
SPECTRIAN CORPORATION AND SUBSIDIARY
COMPUTATION OF NET INCOME (LOSS) PER SHARE
(In thousands except per share data)
<CAPTION>
Three months ended Nine months ended
December 28, December 28,
--------------------------- ------------------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income (loss) $ 6,382 $ 138 $19,089 $(5,512)
======= ======= ======= =======
Weighted average number of shares:
Basic:
Common stock 10,744 8,169 9,515 8,118
------- ------- ------- -------
Diluted:
Common stock 10,744 8,169 9,531 8,105
Common stock equivalents - stock options 747 126 892 n/a*
------- ------- ------- -------
Total diluted shares 11,491 8,295 10,423 8,105
------- ------- ------- -------
Net income (loss) per share - basic $ 0.59 $ 0.02 $ 2.00 $ (0.68)
======= ======= ======= =======
Net income (loss) per share - diluted $ 0.56 $ 0.02 $ 1.83 $ (0.68)
======= ======= ======= =======
<FN>
* Due to the loss in this period, stock options outstanding would be
antidilutive and are therefore not included in the calculation.
</FN>
</TABLE>
20
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM CONDENSED CONSOLIDATED
BALANCE SHEETS, CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS AND NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000925054
<NAME> SPECTRIAN CORP /DE/
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> SEP-29-1997
<PERIOD-END> DEC-28-1997
<CASH> 2,717
<SECURITIES> 98,032
<RECEIVABLES> 34,373
<ALLOWANCES> 373
<INVENTORY> 20,130
<CURRENT-ASSETS> 156,261
<PP&E> 50,622
<DEPRECIATION> 21,311
<TOTAL-ASSETS> 185,572
<CURRENT-LIABILITIES> 25,429
<BONDS> 6,239
<COMMON> 145,508
0
0
<OTHER-SE> 8,396
<TOTAL-LIABILITY-AND-EQUITY> 185,572
<SALES> 47,158
<TOTAL-REVENUES> 47,158
<CGS> 33,702
<TOTAL-COSTS> 33,702
<OTHER-EXPENSES> 8,503
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,429)
<INCOME-PRETAX> 6,382
<INCOME-TAX> 0
<INCOME-CONTINUING> 6,382
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,382
<EPS-PRIMARY> 0.59
<EPS-DILUTED> 0.56
</TABLE>
