For a time, International Rectifier Corp. looked as if it were stumbling in the middle of Death Valley.

It found itself fending off a hostile takeover. At the same time, its markets suffered and the company racked up some horrendous losses. Regulators probed possible accounting irregularities. For good measure, the company accused its former chief executive – son of the company’s founder – of taking off with its trade secrets to start a rival company.

But today, the El Segundo chip maker appears to have walked out of the desert. It has put most of the problems behind it, shifted focus to new strategies and technology, and recently reported good earnings and a promising outlook.

“It was a very rough period,” said Oleg Khaykin, who was named chief executive in 2008. “When you look at a lot of companies in big crises, they end up being done in.”

Among International Rectifier’s biggest challenges was a hostile bid by one of its main rivals, Malvern, Pa.-based Vishay Intertechnology Inc.

On top of all that, the recession had sent the semiconductor industry into a tailspin, pushing down the company’s revenue. In the midst of its problems, the company’s stock price fell below $11, down from $43 in 2007. (Last week, the stock was around $19.50.)

But Khaykin has done his best to ensure the company’s bruises from last year don’t carry over into this one.

He has launched a turnaround effort focused on new technologies and lower-margin semiconductors that have helped propel Rectifier back into the black. In its latest quarterly earnings, announced earlier this month, the company reported $210 million in revenue, a 17 percent increase from the previous quarter and an 18 percent increase from the same time last year. Net income climbed to $28.3 million from a loss of $16.9 million the previous quarter and a huge loss of nearly $190 million in the same quarter last year.

Among its recent problems, it had to fight a shareholder lawsuit related to alleged accounting irregularities that had occurred at one of Rectifier’s foreign subsidiaries. The company also had to deal with the attention of federal prosecutors and the Securities and Exchange Commission who looked into the issue.

But Rectifier eventually agreed to pay $90 million to settle the shareholder lawsuit, and the U.S. attorney for the Central District of California and the SEC announced in late January that they were dropping their investigations. That’s the apparent end of that problem.

Meanwhile, Rectifier also beat back Vishay’s takeover bid and settled a dispute with its Pennsylvania rival, refunding $30 million that Vishay claimed it was owed after it bought a Rectifier subsidiary.

Partly as a result of those developments, analysts see Rectifier as ready for a rebound. The company manufactures chips that are used in everything from washing machines to laptop computers to military satellites

“They did have a rough 2009 but the decks have pretty much been cleared and these guys are generating meaningful cash right now,” said Craig Berger, an analyst at FBR Capital Markets in New York who tracks the company. “And things should continue to improve in 2010.” Berger has the stock rated as “outperform” with a price target of $26.

Still, not all is rosy for Rectifier. The health of the semiconductor industry is closely tied to the global economy and credit markets. Rectifier’s fortunes depend on a rebound in both.

It remains to be seen if the recent surge in orders for semiconductors worldwide that boosted Rectifier’s recent earnings has staying power.

And it is still fighting another matter. Rectifier continues a court battle with ousted Chief Executive Alexander Lidow. Rectifier claims that Lidow, when he left the company, took with him information and intellectual property to start a rival business. A federal judge threw out the lawsuit last year and Rectifier refiled it in state court. That lawsuit is ongoing.

‘Legacy issues’

Khaykin acknowledged that the company’s crises – he calls them “legacy issues” – have been a distraction for management. But he said Rectifier’s focus is on one thing: semiconductors.

“You can deal with all the accountants and lawyers and regulators, but as a tech company you really make it or break it with the product,” he said.

Analysts point to several Rectifier product strategies that hold promise. The company has reinvested in the market for so-called “discrete chips,” a specific kind of semiconductor that has profit margins of about 30 percent to 35 percent. Before Khaykin took over, the company had pulled back from the discrete market in favor of higher-margin semiconductors.

The decision to delve back into discretes has already borne fruit: At one point three years ago, chips for the discrete market accounted for $40 million in quarterly revenue. Last quarter, the company had increased that to $76 million.

Rectifier has also poured money into research and development, and nascent business units that have potential, such as its automotive group. A few years ago, semiconductors for the car industry were seen as a novelty rather than a stable business. But as more automakers installed electronics in their cars – everywhere from the drive train to the steering wheel to in-car GPS systems – demand for auto-certified semiconductors soared.

Shortly after he took over the company, Khaykin made Rectifier’s automotive business a separate unit, and the company went after big auto parts suppliers such as Delphi Automotive LLP and Continental AG. In its latest quarterly earnings, revenue from Rectifier’s automotive unit increased 28 percent from the previous quarter, and accounted for 8 percent of the company’s total revenue. Henning Hauenstein, the vice president in charge of the automotive group, predicted automotive chips would make up 10 percent to 15 percent of the company’s total revenue in two to three years.

“We have had a lot of growth and visibility, and we think we’re two to three years ahead of competitors,” Hauenstein said. “And there’s been huge demand from the market.”

Finally, Rectifier is developing the next generation of semiconductors, made of gallium nitride. The main selling points of the chips are their increased efficiency and capability of operating with high voltage. They can be used in everything from nanotech products to PlayStation 3 game consoles. Analysts said Rectifier’s gallium nitride chips show potential and could help the company take the pole position in an important market at least for the next couple years.

The gallium nitride chips were at the heart of the company’s litigation against Lidow. He was accused of trying to steal the company’s gallium nitride trade secrets and launching a competing company. His attorney said Lidow isn’t using Rectifier’s gallium nitride technology.

High guidance

For the current quarter, Rectifier gave revenue guidance of $225 million to $235 million and projected its gross margin would be between 34 percent to 35 percent. That was well above analyst estimates and was another encouraging sign that Rectifier had righted the ship.

Meanwhile, the company has more than $200 million in cash on hand and zero debt. That should help Rectifier weather further swings in the market. Khaykin said executives will be evaluating whether they would use the cash to invest in internal departments or acquire outside companies, or return it to shareholders in the form of a one-time dividend or stock buyback.

Ultimately, Rectifier’s success in 2010 might be tied to key industries, such as consumer electronics, automotive and business infrastructure that rely on semiconductors. If those industries suffer, they could take Rectifier down with them. But if they surge, Rectifier will ride their coattails.

Regardless, Khaykin projects 2010 should be a dramatic improvement over 2009.

“It’ll be like night and day,” he said