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QuickLogic Buys SensiML, Gains AI-based SaaS Toolkit Platorm

Zacks Equity Research

QuickLogic Corporation QUIK recently acquired SensiML Corporation in an all-stock deal. Notably, SensiML will continue its operations as a separate division of QuickLogic. However, financial details of the deal have been kept under wraps.

The buyout is anticipated to empower QuickLogic’s product portfolio with machine-learning (ML) tools required to devise embedded algorithms.

Notably, the integrated algorithms enhance performance of microcontrollers (MCUs) and SoCs (system-on-a-chip microchips). These MCUs and SoCs find ample application in smart edge computing devices.

SensiML’s focus on commercialization and development of SaaS-based ML tool suite, SensiML Analytics Toolkit utilizing artificial intelligence (AI) driven automation methods is commendable. The Toolkit’s strength in offering sturdy integrated algorithms to support Internet of Things (IoT) based MCUs and SoCs is a key catalyst.

QuickLogic offers sensor processing solutions including FPGAs (Field Programmable Gate Arrays) as part of hardware products and software-based algorithm solutions. The company’s business complements that of SensiML, which is a positive.

In this regard, management is optimistic about the cross-leverage opportunity to integrate SensiML software suite with QuickLogic eFPGA IP and QuickAI platform.

Notably, SensiML will continue to support third-party SoCs apart from that of QuickLogic’s SoCs and other solutions. Management anticipates positive EBITDA for SensiML unit in fiscal 2019.

Following the news, shares of QuickLogic increased 7.3%, with the stock price closing at approximately 91 cents in the last trading session. QuikLogic stock has lost 52.3% in the past year compared with industry’s 12.9% decline.

Achievements of SensiML

SensiML team was formerly a software group of Intel INTC. The founders of SensiML acquired the Intel Knowledge Builder IP technology to form an independent company in 2017.

In fact, Knowledge Builder Toolkit offered support to Intel’s Curie and Quark SE MCUs, the first commercially available MCUs to incorporate robust ML accelerator technology.

With an aim to reduce power consumption, the SensiML Analytics Toolkit automates optimization of AI models by utilizing eFPGA technology and heterogeneous multi-core SoC infrastructure.

SensiML Analytics Toolkit currently supports QuickLogic’s latest QuickAI Platform, Intel’s Atom MCUs, Arm Cortex SoCs, among others. The Toolkit also supports QuickLogic EOSAI, which management anticipates unveiling shortly.

AI in Edge & Endpoint Hold Key

We believe the acquisition of comprehensive AI-driven SaaS platform will enable QuickLogic to offer sturdy edge AI platform solutions. With the enhanced embedded algorithms, the company is anticipated to benefit from rapid adoptionof its product portfolio, primarily the new QuickAI platform, EoS sensor processors and ArcticPro eFPGA IP, among others.

Further, the buyout is expected to aid the company in expanding its TAM with the SaaS revenue business.

With the buyout, QuickLogic attempts to provide a comprehensive practicalsolution in a bid to explore emerging markets, including AIin edge computing and IoT endpoint devices.

Notably, per ResearchAndMarkets report, “global AI in embedded IoT devices market” is anticipated to advance to nearly $26.2 billion by 2023. Moreover, the report predicts that by 2023, semiconductors and embedded devices exceeding 87 billion units “will be shipped in support of IoT”.

Meanwhile, QuickLogic’s strength in smartphone market and increasing demand for wearable products in the B2B market bode well. Furthermore, the company is working with a Japanese smartphone OEM, which is expected to adopt QuickLogic’s EOS S3 SoC for its new models scheduled to be launched in 2020.

We believe the buyout of SensiML positions QuickLogic well to capitalize on the aforementioned growth prospects.

Risks Remain

However, consolidating semiconductor market and stiff competition from notable eFPGA chip makers, including Intel, Xilinx XLNX among others, is concerning.

Additionally, QuickLogic’s eFPGA and SoC development, and enhancement efforts to stay afloat in the competitive market are resulting in higher capital expenditures, which remain an overhang on margin expansion.

Zacks Rank & Stock to Consider

QuickLogic currently carries a Zacks Rank #4 (Sell), which might change given the latest positive development.

Upland Software UPLD, sporting a Zacks Rank #1 (Strong Buy), is a stock worth considering in the broader technology sector. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Upland Software is currently pegged at 20%.

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