CUBE: C-Cube--Strong Third Quarter Results With Good Performances Across The Board
Deutsche Banc Alex. Brown - US Equities
Erika Klauer
October 19, 1999
Klauer, Erika 212-471-3234 10/19/1999
Deutsche Banc Alex. Brown
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C-CUBE MICROSYSTEMS INC. [CUBE] "STRONG BUY"
C-Cube - strong third quarter results with good performances across the
board
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Date: 10/19/1999 EPS 1998A 1999E 2000E
Price: 37.06 1Q 0.27 0.32 0.38
52-Wk Range: 45 - 16 2Q 0.25 0.28 0.38
Ann Dividend: 0.0 3Q 0.28 0.32A 0.41
Ann Div Yld: 0.00% 4Q 0.31 0.39 0.45
Mkt Cap (mm): 1,405 FY(Dec.) 1.11 1.31 1.61
3-Yr Growth: 20% FY P/EPS 33.4X 28.3X 23.X
CY EPS 1.11 1.31 1.61
Est. Changed Yes CY P/EPS 33.4X 28.3X 23.X
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Industry: SEMIS & SYSTEMS
Shares Outstanding(Mil.): 37.9
Return On Equity (1998) : 48.0%
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HIGHLIGHTS:
C-Cube reported another record quarter that were essentially in line with
our expectations and slightly ahead of the Street. Earnings per share were
$0.32. Third quarter sales were $101.4 million, up from $86.2 million a
year ago and $94.1 million in the prior quarter. The business was about 50%
provided by Divicom and 50% from semiconductors. The Divicom business grew
to $49.1 million, which represented 5% sequential growth and 30% from a
year ago. The Divicom division also enjoyed 50% gross margins. The
semiconductor sales totaled $52.3 million, which represents sequential
growth of more than 10%.
Looking forward, the outlook is for continued growth. While some of the
upside that the company might have shown in the fourth quarter may be
eliminated due to the recent Taiwan earthquake, the company should still
show excellent sequential growth. Moreover, the fourth quarter should also
enjoy continued strength in both gross and operating margins. Longer term,
we see the outlook as equally positive. On the semiconductor side, the
company continues to pick up strong design wins in set-top boxes and
consumer DVD applications. ON the Divicom side, we see continued dominance
of the core markets and penetration into traditionally difficult markets
such as U.S. cable.
We continue to believe that C-Cube is on a path for excellent growth. We
still believe that the company can post 1999 earnings per share of $1.31
and 2000 of $1.61. We believe that the stock can still reach $48, or 30
times our 2000 estimate. We reiterate our STRONG BUY recommendation. |
