>This is a breakthrough component technology company. It is some kind of mix of Galileo (ramping unit sales) and @Home (cable modem buzz).<
I know the bankers will try to position it as breakthrough, but I don't see them that way. Their products are DSP-based physical-layer devices, where they have done a very good job of delivering the first all-digital phy for 10/100 ethernet (these sit ahead of the Galileo switching chips). I haven't seen a product breakdown, but I am betting this is the major component of their historic revenue growth, but they now have competition from Level One and will have more from a host of companies big (National) and small (Comcore, Mysticom) later this year. They have a more entrenched position in cable modems, where their phy devices are in everyone's boxes, but that is a much smaller market (there will be 35 million Fast Ethernet ports shipped this year, or maybe that was last year). In DBS they are way behind Rockwell, and in xDSL they trail a host of companies with entrenched positions.
I think the value here is that they are a very good company who have executed very well and established stong customer relationships, which are their real strengths, IMHO. There is nothing "breakthrough" about their technology (at least in comparison to Rockwell, PairGain, et al)-they have just done a better job to-date of completing the algorithms and getting them implemented in working silicon (which is quite an accomplishment in itself).
As for valuation, I don't see why they should have a huge premium over Level One or Pair Gain, but they probably will, given the "buzz", which in part I suspect is because they have avoided the venture community so far. I really don't understand the comparison to VRSN, unless you mean that this one will also be priced without relationship to fundementals.
The road show is in town Monday-see you there? |
