Microsemi Sees Defense Demand

Microsemi Corp., which has drawn praise from Wall Street for curtailing its defense business in recent years, will likely see a surge in military orders as the war on terrorism escalates.

Since the Sept. 11 terrorist attacks on the World Trade Center and the Pentagon, weapons builders and makers of jet fighters have been calling Microsemi, said company President James J. Peterson, adding that Microsemi is ready to ramp up again.

“Over the last couple of weeks, we’ve seen interest in some of our products that we haven’t seen in years,” Peterson said.

A defense contractor since 1968, the Irvine manufacturer of semiconductors, transistors and other electronic parts had reduced its reliance on military and aerospace spending from 75% of its sales a decade ago to 36% last year.

But based on inquiries so far, revenue from military orders could grow to 50% or 60% of total sales. The company could accommodate such an increase “without much strain,” said David R. Sonksen, chief financial officer.

For the military, Microsemi makes tiny chips, transistors, radio frequency products and a host of other devices. Its devices go on every weapons system, from tanks to bombs. For instance, it has $50,000 to $75,000 worth of parts on every cruise missile--and dozens have been fired into Afghanistan so far, Sonksen said.

It also has $500,000 worth of gear in each jet fighter it supplies, from cockpit motors to devices for radars, supplying such defense-related companies as Boeing Co., General Electric Co., Lockheed Martin Corp., Northrop Grumman Corp. and Raytheon Co.

Top managers in conference calls last week weren’t sure how many of the inquiries it has been getting will translate into orders. But the 2,000-employee company figures it can accommodate an uptick in business.

Its two plants in Orange County, which make nearly two-thirds of its defense products, are operating at only 60% capacity, Sonksen said.

With low returns and less defense spending through much of the 1990s, many contractors left the sector to focus on consumer and commercial products. No Microsemi customer, for instance, now accounts for more than 4% of sales.

The stock hit a yearlong high of $73.24 a share in June, and the company soon issued a 2-for-1 stock split. On Monday, the stock, on an adjusted basis, closed at $30.85 a share, down 2 cents from Friday’s close on Nasdaq. But that still marks a 122% gain since the start of the year.