67 WALL STREET, New York - December 5, 2011 - The Wall Street Transcript has just published its Semiconductors Report offering a timely review of the sector to serious investors and industry executives. This Semiconductors Report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: Energy Efficiency, Cloud Computing and Telecommunications - Semiconductor Content Increase Across Verticals - Semiconductor Manufacturer Consolidation
Companies include: ATI (ATI); AUO (AUO); Aixtron (AIXG); Alcatel-Lucent (ALU); Altera (ALTR); Atmel (ATML); EZchip (EZCH); Google (GOOG); IBM (IBM); Inphi (IPHI); Intel (INTC); Juniper (JNPR); KLA-Tencor (KLAC); Linear Technology (LLTC); Marvell (MRVL); Microchip (MCHP); Micron (MU); NVIDIA (NVDA); NetLogic (NETL); Qualcomm (QCOM); TSMC (TSM) and many more.
In the following brief excerpt from the Semiconductors Report, industry experts discuss the outlook for the sector and for investors.
Sundeep Bajikar is a Senior Semiconductor Research Analyst at Jefferies and Company, Inc. He was previously in a similar role at Morgan Stanley for about five years, before which he was in engineering and strategic planning positions at Intel Corporation for nine years. Mr. Bajikar holds an MBA in finance from The Wharton School of the University of Pennsylvania, in addition to an M.S. in electrical and mechanical engineering from the University of Minnesota. He also has completed graduate-level engineering course work at Stanford University, and holds 10 U.S. and international patents issued in his name, with more than 20 additional patents pending.
TWST: Which of the companies in your coverage are your top picks right now and why?
Mr. Bajikar: Within the small/medium-cap space, my top idea is Inphi, their ticker is IPHI. They went public last year. They have a couple of different areas of business, and 70% of the revenues come from the server market. They provide memory buffers that allow you to back more memory inside a standard server than you would otherwise be able to do. That is good for people that are building data centers or even the next-generation cloud infrastructure because it improves efficiency of virtualization just by packing in more memory. And it's relatively low cost because you are paying the cost of the memory buffer rather than upgrading your entire microprocessor or even the server. So that's 70% of Inphi's revenues. The other 30% of Inphi's revenues come from high-speed communications, primarily optical components that are used to plug fiber optic cable into routers and switches for long-distance high-speed transmission, whether it's 10 gigabits per second or 40 gigabits per second, and an increasingly 100 gigabits per second.
The initial story at IPO was they would have a large product cycle on Intel's next-generation servers, which are predicted to come to market in Q1. Intel is shipping their chips in the market this quarter, and then the server OEMs are expected to bring servers to market next quarter in Q1 of 2012. These servers will feature Inphi's next-generation memory buffer, which effectively increases the content for Inphi and it basically quadruples the amount of memory that you can pack in the server. So it's very exciting technology. It's a portion of the server market that's referred to as HPC, high-performance compute. It's only about 10% of the market, so it's sort of a niche market. But as we did more work on this, what we figured out is that the application for this next-generation memory buffer is actually much broader because it can go into the core of the cloud. It can increase your virtualization efficiency and therefore have much broader relevance than just the initial 10%. So we have a view that penetration could be anywhere from 20% or more into the server market, which effectively translates to a large upside for Inphi if that actually happens. That's a big part of the near-term story for Inphi.
TWST: Is there anybody else that you like?
Mr. Bajikar: The other candidate would be PMC-Sierra. They play into two of the secular themes that we discussed. The first they play into is storage. They are a provider of high-speed storage connectivity for servers. Sometimes storage is connected directly to the server, sometimes storage is available as part of a storage area network. In either case, all the different storage drives have to be connected together. PMC basically offers a solution to be able to do that, and in some cases, even supports the hardware encryption technology to protect data. That's about 45% of their revenues. Considering the rate of deployment of the cloud and storage as part that, then clearly the near-term setup for PMC-Sierra is quite positive.
PMC also acquired Wintegra, an Israeli company, last year, which provides about 5% of the company revenue. Wintegra provides a very unique solution for mobile backhaul because effectively you have this old network, which is your 2G and 3G base stations, and you are overlaying this LTE network on top of it. So you are stuck with the old method of transporting data, which was circuit switch or DDF and all the LTE data is packet based. So you need a technology that combines the old and the new, which this Wintegra solution does very effectively. From my standpoint, it is really the only game in town that provides a full solution for this purpose. So as you think about how the network infrastructure gets built out and the need for a new category of devices called sell-side routers - which previously existed but are getting deployed increasingly, now particularly with people like AT&T (T) and Verizon (VZ) and anybody who is doing LTE in a big way - we think that is going to be a source of upside also at PMC going forward.
The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This Semiconductors Report is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
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