After Persevering for 22 Years, Peregrine Semiconductor Marks IPO
[Updated 8/7/12 5:30 pm, with Peregrine pricing shares.] It’s been a long time coming, but San Diego’s Peregrine Semiconductor raised $77 million in its IPO, offering 5.5 million shares at $14, according to Renaissance Capital’s IPO website. That’s at the low end of its planned range of $14 to $16. Trading is set to begin tomorrow on the NASDAQ market under the ticker symbol PSMI.
The company has spent 22 years getting to this point. Peregrine began with an unusual approach, using synthetic sapphire as a semiconductor material in its proprietary ultraCMOS (Complementary metal–oxide–semiconductor) design for radio frequency chips. It took time to master the technique. Others that tried silicon on sapphire encountered high defect rates, making the technology more suitable for aerospace and defense projects, where performance and other factors can be more important than cost.
As a result, Peregrine’s market was mostly limited during its first decade to satellite makers and military programs.
The company moved to expand beyond that market in 2001, eventually designing chips for cell phone antenna switches, digital attenuators, mixers, and other commercial radio devices. But it is not a high-dollar market. Prices for cell phone switching chips, for example, run less than 20 cents apiece. Peregrine says it has shipped more than 1 billion radio frequency chips since 2006.
Yet Peregrine persevered, working to integrate more functions in each design and to reduce its costs. The semiconductor design company founded by Rory Moore, Mark Burgener, and Ron Reedy filed for an IPO in November, 2010. Today the company has about 340 employees.
In more recent filings, Peregrine says it plans to sell 5.5 million shares, or nearly 22 percent of its 25.23 million outstanding shares, and use the proceeds for working capital and other general corporate purposes.
The company still faces a number of challenges, including the vicissitudes of an intensely cyclical market for RF semiconductors. In its regulatory filings, the company also notes that its three largest direct customers account for more than two-thirds of its revenue (68 percent in 2011 and 80 percent during the first six months of 2012). Peregrine’s chief rivals include many fiercely competitive companies, including M/A-COM Technology Solutions, NEC, Renesas Electronics Corp. Skyworks, Texas Instruments, and Toshiba.
Peregrine says it also is carrying an accumulated deficit of more than $231 million, and the company remains mostly unprofitable—Peregrine lost $9.7 million in 2011. Yet, the company’s revenue grew by 18 percent last year, from $91.1 million to $107.8 million in 2011.
The company’s largest investors are not planning to sell their shares, according to a recent regulatory filing, but the filings show eight employees plan to offer a combined total of 159,220 shares. Peregrine’s biggest investors, are Morgenthaler Partners (14 percent); entities affiliated with Advanced Equities (10.6 percent), and the U.S. Small Business Administration, (10.3 percent).