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EZchip Semiconductor Limited Message Board

  • message_board_monitor message_board_monitor Jan 25, 2008 12:47 PM Flag

    Q4 2007 / REV, EPS, breakeven, etc

    With our Q4 report due out soon, those results (expected and reported) are likely to drive the stock between now and the actual report and conference call. I thought I'd start this topic thread to discuss any expected results estimates and what we all feel is likely to be reported, and what we feel needs to be reported in order to become profitable.

    With our new virtual 100% ownership of EZchip's results now, I feel that our previous breakeven revenue guidance given by our CEO of about $5.5-6 million per quarter is now proportionately increased to about $7-7.65m/qtr.

    Our revenues should also be proportionately higher too so this should all be a "relative wash", EXCEPT for the increased fixed costs announced along with the NPA development (+20%), which should brings our new NPA-inclusive breakeven to about $9 million per quarter when all is up and running IMHO.

    ($14m opex / .78 previous ownership = ~$18m total EZ opex)
    ($18m x 1.20 (incl new NPA costs) = ~$21.6m opex)
    ($21.6m opex incl NPA / .60 product margins = $36m breakeven rev point)

    This $9 million per quarter is what I see our future quarterly revenues needing to be to show continued and improving positive EPS. Everything above $36 million per year should be pure tax-free EPS at about a 60% margin level per management guidance.

    We were predicted to capture more than half of LinleyGroup's old 2009 projected $250 million high speed NPU market (now $400m!), which should give us revenues of over $125 million by then (without NPA). Conservatively IMHO, $100 million in revenues by end of 2009, less $36 million breakeven, would give us $64 million of revenues at approximately 60% margins.

    $36 million in EPS on 23.3 million shares total, provides $1.50+ EPS within 24 months from now.

    $1.50/eps x 30 p/e (extremely conservative) = $45+ stock price

    $14 to $45+ = 300%+ return in 2 years

    I like that kind of return, and frankly I think it will be much higher than that. This is all calculated using what I feel are fairly conservative numbers on NPU alone (without NPA revs at all). But these are MY numbers and MY estimates. Be sure to do your own homework and consider what is best for YOU. There are many risks to EZchip's success and anything could happen to change our outlook on the negative side. This is a very high risk situation and industry.

    FWIW, I have used much of the guidance given on this conference call transcript filed with the SEC:

    and this news release on the slightly increased "piggyback" costs associated with our new NPA development:

    I hope that all makes sense, and encourage anyone to post their own work and opinions on these issues. Best of luck to all longs!

    MBM :-)

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    • These VC shares apparently weren't actually issued until January 22nd, and not in December as it seemed in the comapany news release about them previously.

      Is it possible our Q4-07 report may be based on just 18.3 million shares and the 78% fractional ownership of EZchip one final time?

      Any opinions on the share count and ownership ratio to be used for our upcoming Q4 EPS results?


    • With these new shares being issued, our per-share numbers will change based on being divided by 25.5 million shares going forward now IMHO.

      Hopefully these new 2.18 million shares are the last ones issued for a very long time, since we've had such a large increase in total outstanding shares over the past 6 months.

      It wouldn't matter as much IMO if we had profits, but without profits - more shares just make our unprofitable market cap bigger and less enticing to new Institutional money.

      All IMHO. Good luck to all longs.

      MBM :-)

    • mbm,

      I still havent revised my numbers with the new ownership, but I was assuming that the coming quarter numbers would be the last at or near break even, including the additional expenses for the NPA.
      This said, I was already assuming 35M revenues which now translates into over 44M for 2008 with complete ownership, thus bringing us in the black for the whole of '08. Its all upward from there on, and the recent news about JNPR and possibly CSCO should just be accretive to this forecast.

      GL to all longs.


    • wow mbm, great work. thanks for all the details! my numbers were a little different, because i think my method was more simplistic, but i think yours are more accurate.

      i don't see any reason to disagree with your calculations. maybe somebody else will see something, but thanks for sharing all of that. we need more posts like this.

      $9m/qtr seems to be the current likely number we need to break for reliable profits now that we own all of ezchip.

    • your numbers are not acurat lan optics published ezch results in the past not as lan optics revenues but the total of the results.(no 70+%) you need to recalculate.

      • 1 Reply to mountainproject1
      • Sorry mountainproject, but you are mistaken. LNOP has been reporting quarterly results of their ownership portion of EZ's results.

        Now that we own virtually 100% of EZ, all numbers increase proportionately - except for the inclusion of our totally new expenses for the NPA that we hadn't seen before.

        Look into it further for yourself. You deserve to know exactly what you own. Good luck with your position.

        MBM :-)

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