Silicon Motion (SIMO) Restructures Businesses to Spur Growth
Silicon Motion Technology Corporation SIMO has restructured its organizational framework to boost growth amid a challenging macroeconomic environment. In addition, the company has executed some management changes to better navigate the volatile market conditions.
Effective immediately, the changes include the establishment of two business units, namely the Client & Automotive Storage (“CAS”) and the Enterprise Storage & Display Interface Solution (“ESDI”), with a focus on delivering the best-in-class solutions for customers. The CAS business unit comprises the company’s client SSD controllers, mobile controllers, Ferri products and expandable controllers, while the ESDI unit encompasses the enterprise SSD controllers and display interface products.
The dedicated business units will enable Silicon Motion to develop the most advanced controller technology and deliver industry-leading solutions to tap new market segments for long-term growth. The core focus on controller technology was primarily driven by the increasing adoption of NAND in consumer, industrial, commercial and enterprise applications.
The company appears to be well-equipped to adapt to industry changes. It has collaborated with flash vendors to develop proprietary controller technology to overcome the existing weakness of 3D NAND and outshine peers. It has commenced initial sales of 3D SSD controllers to flash partners. The company expects this controller to be a significant SSD controller growth driver for the next year as NAND Flash partners’ 3D capacity expands. Also, the company commenced mass production of PCIe NVMe client SSD controllers for flash partners. We believe accelerated product sales and favorable industry trends signal bright prospects for Silicon Motion.
Silicon Motion has expanded its SSD controller program engagements with PC OEMs and eMMC/UFS controllers for smartphones, automotive applications and IoT/smart devices. The company is adding to this momentum with the upcoming launch of its next-generation enterprise-class SSD controllers. Silicon Motion’s eMMC is showing strong signals of rebound, thereby adding to the strength of its overall embedded storage market that comprises both SSD controllers and eMMC embedded memory.
As market trends suggest the tilting of balance from eMMC 4.5 toward eMMC 5.0, the company foresees lucrative prospects for eMMC 5.1 controller sales. We believe an expanding customer base and innovative products will likely act as tailwinds for the company’s top-line growth. Notably, over the last 10 years, Silicon Motion has shipped more than 5 billion controllers cumulatively – more than any other company in the world. On a yearly basis, Silicon Motion ships more than 750 million NAND controllers.
Shares of the company have lost 11.6% in the past year against the industry’s growth of 56.6%.
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Zacks Rank & Key Picks
Silicon Motion presently has a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Comtech Telecommunications Corp. CMTL, presently carrying a Zacks Rank #2 (Buy), is a solid pick. Headquartered in Melville, NY, the company is a leading global provider of next-generation 911 emergency systems and secure wireless communications technologies to commercial and government customers.
Comtech’s key satellite earth station modems incorporate forward error correction and bandwidth compression technologies, which enable its customers to optimize their satellite networks by either reducing their satellite transponder lease costs or increasing data.
Arista Networks, Inc. ANET, carrying a Zacks Rank #2 at present, is likely to benefit from strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architectures and enhance their cloud experiences. Arista has a long-term earnings growth expectation of 20.4% and delivered an earnings surprise of 12%, on average, in the trailing four quarters.
It holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed datacenter segment. Arista is increasingly gaining market traction in 200- and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations.
AudioCodes Ltd. AUDC currently carries a Zacks Rank #2. It has a long-term earnings growth expectation of 24.8% and delivered an earnings surprise of 14%, on average, in the trailing four quarters.
Headquartered in Lod, Israel, AudioCodes offers advanced communications software, products, and productivity solutions for the digital workplace. It provides a broad range of innovative products, solutions and services that are used by large multi-national enterprises and leading tier-1 operators around the world.
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