The Cowen presentation was very upbeat and interesting. Not a lot new except that TSRA did say that the Optics market opportunity is larger than anticipated (100's of millions)and that TSRA is very satisfied with Silent Air Cooling developments (there are size and shape benefits in addition to the silence benefit). I urge followers of this Board to listen to the conference call replay - it is only 30 minutes long and is a good capsule of the Company. One problem is that the audio to the Questions portion (usually my favorite part) was either cut off or there were no questions).
For the silent cooling: radical shapes is the new part; thinness was the price of admission.
The business early about the upward revision having nothing to do with incentive contracts begged the question of whether increased overall activity will make the incentives kick in earlier (I think it will, but probably not enough earlier to cross a quarter break).
Backing off on $100MM optical business by 2011 can't be received well.
There is an apparent disconnect between present pilot-scale manufacturing and a mostly-product imaging/optical business of the projected size. A little more color there would have helped.
Given the present state of legal actions, I was extremely happy that Mr Nothaft said nothing about them. You don't want to appear to take a judge for granted during deliberations.
My impression of these sponsored conference presentations is that there are rarely many questions on the spot; the questions are deferred to break-out sessions which aren't recorded (and therefore management is not very forthcoming).
By the way, there was more large volume action in the January $17.50 calls yesterday - this time the open interest went down by appx 1,000 contracts and most of the trading was near the end of the day at $3.90.
Tessera pre-announces June quarter revenues positively Tessera pre-announced June quarter revenue positively. The revenues are now expected to be $74-75M versus prior guidance of $67-70M. The upside was driven by a broad based pick up in micro-electronics royalty and license revenue with limited benefit from one time items (we estimate less than $1M) or any single customer. While the improved microelectronics revenue is a positive, the lack of any indication of a material acceleration in optics revenue keeps us on the sidelines. We are increasing our estimates as we believe the step up in microelectronics revenue will persist as semi unit volumes increase but we leave our $22 PO unchanged as peer multiples have compressed. No change to Imaging & Optics outlook We maintain our CY2011 imaging and optics outlook of $60M (no material contribution from Siimpel). We believe increasing traction in imaging and optics business is the key to further upside to the stock. Adjusting estimates, no change to PO, maintain Neutral Semiconductor peer multiples have compressed. We expect TSRA stock to continue to trade at a discount to the 13-14x CY2011E that pure semiconductor comps trade for due to the risks associated with the volatile nature of legal-related expenses and outcomes. We apply a 10-11x multiple (20% haircut) on CY11E operating EPS of $1.20 and adding back cash to give us our $22 price objective. Given the lack of upside potential or growth catalysts, we maintain our Neutral rating.
Here are some highlights of the Barclays notes regarding the preannouncement:
Investment Conclusion We continue to see shares grinding gradually higher on solid Microelectronics fundamentals, an attractive longer-term outlook for the Imaging & Optics segment, and attractive valuation (9x/7x our CY10/CY11 EPS ex net cash of $9 per share). Summary This morning TSRA positively pre-announced 2Q revs, with the Microelectronics rev guide raised to $65-65.5M on broadbased strength across TSRA’s licensees (previous guide $58.5-60.5M) and Imaging & Optics rev guide raised to $9.0- 9.5M primarily on Micro-Optics/litho strength (previous guide $8.5-9.5M). With stronger than anticipated wireless and DRAM shipments in 1H10, we anticipate TSRA’s 3Q royalties to trend seasonally higher, augmented by a ~$6M payment from UTAC, partially offset by the 2 DRAM volume discounts kicking in slightly earlier than in 2009. We raise our 2Q revs/EPS to $75M/$0.27 (cons $69M/$0.21), CY10 to $296M/$1.10 (old $283M/$0.95, cons $284M/$0.98) and maintain CY11 of $330M/$1.45 (cons $332M/$1.38). Potential catalysts include: potential ionic cooling licensee win, update on contract renewals with 4 small licensees, determination of Hynix trial date.