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EZchip Semiconductor Ltd. Message Board

  • sempar_grumpy sempar_grumpy Mar 5, 2013 12:10 AM Flag

    Bloomberg - EZchip Trails Peers as Competition Dims Sales: Israel Overnight

    By Victoria Stilwell & Leslie Picker - Mar 4, 2013 6:42 PM ET

    EZchip Semiconductor Ltd. (EZCH), the worst-performing stock among Israeli companies traded in New York over the past month, is poised to extend declines as competition grows, according to Chardan Capital Markets LLC.

    Shares of the Yokneam, Israel-based company fell 22 percent in the last month, the biggest decline on the Bloomberg Israel- US Equity Index (ISRA25BN) of the largest U.S.-traded Israeli equities. EZchip, which is near its cheapest valuation since December 2011, added 0.5 percent to $23.81 yesterday. The index slipped 0.3 percent while Cellcom Israel Ltd. (CEL) retreated after its 2012 profit plunged 36 percent.

    EZchip has retreated 26 percent since Chief Executive Officer Eli Fruchter told analysts on a Feb. 13 conference call that one of its customers, Huawei Technologies Co., is developing its own processor, reducing the need for the Israeli company’s technology. Future products from rivals such as Marvell Technology Group Ltd. (MRVL) and Broadcom Corp. (BRCM) may also cut demand for EZchip, said Jay Srivatsa, a New York-based analyst at Chardan Capital.

    “It’s clear now that nobody is feeling compelled to stay with an EZchip solution,” Srivatsa said yesterday in a telephone interview. EZchip shares have fallen 38 percent since Srivatsa cut his rating to sell from neutral in November.“Any single announcement by anybody, being their direct competitors or internal solutions, could be really bad for this company. There’s further downside.”

    Biggest Decline
    EZchip, which makes technology that speeds up data delivery, has dropped 28 percent to 87.60 shekels in Tel Aviv this year, or the equivalent of $23.43.

    The company’s U.S. shares traded at 19.5 times estimated earnings on March 1, the cheapest valuation since December 2011. They traded at a multiple of 19.6 yesterday.

    The company’s 2012 revenue fell 14 percent to $54.7 mi

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    • Biggest Decline
      EZchip, which makes technology that speeds up data delivery, has dropped 28 percent to 87.60 shekels in Tel Aviv this year, or the equivalent of $23.43.

      The company’s U.S. shares traded at 19.5 times estimated earnings on March 1, the cheapest valuation since December 2011. They traded at a multiple of 19.6 yesterday.

      The company’s 2012 revenue fell 14 percent to $54.7 million as adjusted earnings sank 16 percent to 92 cents per share. Sales will probably reach $160 million by 2016, down from about $250 million previously expected, according to EZchip’s Feb. 13 earnings call and data compiled by Bloomberg.

      “EZchip has always said that its performance is much superior to what Marvell and Broadcom have to offer, but there’s a range of products that competitors could come out with,” Srivatsa said. “In the event there’s a directly competitive product to an EZchip product, that could be really bad, there’s no doubt about that.”

      Competitor Product
      Broadcom executives weren’t available to discuss industry competition, Christina Stenson, a spokeswoman based in San Francisco, wrote in an e-mailed message. Marvell management was also unavailable for comment, spokesman Daniel Yoo said by e- mail yesterday from Santa Clara, California.

      If EZchip customers did consider a competitor product, the switch would probably be years away, mitigating the immediate impact on the company’s revenue, Jeff Schreiner, an analyst at Feltl & Co. in Minneapolis, who rates the shares buy, said by phone yesterday.

      “It’s EZchip’s job to stay ahead of the internal development at their customers,” Schreiner said. A customer developing an in-house product has a “much higher degree of probability than any external vendor taking share,” he said.

      The Bloomberg Israel-US gauge retreated 0.3 percent to 87 yesterday as the TA-25 index rose 0.2 percent to 1,217.96.

      ‘No Reprieve’
      Cellcom slipped 0.7 percent to $7.15 in a third day of declines. Israel’s largest mobile phone provider reported a 36 percent drop in 2012 adjusted profit amid heightened competition in the mobile market, the Netanya, Israel-based company said yesterday in a statement. Cellcom shares traded in Tel Aviv rose 0.9 percent to 27.02 shekels, or $7.23.

      “There’s no reprieve here,” Gilad Alper, an analyst at Excellence Nessuah Investment House Ltd., who has rates the shares the equivalent of neutral, said by phone yesterday from Ramat-Gan, Israel. “The competition isn’t going to ease up at least for the next few quarters, so there’s no reason to be optimistic.”

 
EZCH
19.29+0.35(+1.85%)Jan 29 4:00 PMEST

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