[Dec03 Quarter Preview from USB Piper Jaffray]
Modest Upside Likely in September Quarter;
Outlook In-Line and New Product Ramp Accelerating
Q403: We believe Xicor will deliver results at the higher end of its 5%-10% Q/Q revenue growth guidance, which includes its recent acquisition of Poweready. We note that the Company required approximately 45% turns to reach the mid point of that target, compared to the 35% turns it achieved during the year-ago period and 25% in the recent September quarter. We are currently forecasting revenue of $11.3 million (up 8% Q/Q) and EPS of $0.02.
Key Issues: In our view, Xicor continues to execute on its high-performance mixed-signal strategy, and we believe the Company has positioned itself well for 2004 as its rapidly-expanding portfolio of new products begin to gather design win and revenue momentum. In fact, we expect the Company's new products (including its family of AFEs, battery management products, precision voltage references, and hot swap ICs) to be Xicor's primary revenue growth driver in 2004. In addition, these high performance products also command higher gross margin, which we believe could materially enhance the Company's overall profitability profile over the next twelve months. While we believe we are still at the early stages of product adoption, early indications suggest wide and successful reception, especially for the Company's new analog front-end (AFE) devices for display applications, which we note have gross margins well in excess of the Company's corporate average of 56% in Q303. Consequently, we believe that while Q403 revenue upside remains limited, we believe gross margins could come in ahead of our 53% estimate, with substantial revenue upside possible for 2004 and 2005.
Outlook: Regarding the outlook for the March quarter, we believe our current revenue projection of $11.7 million (up 4% Q/Q) is achievable. In addition, with an improvement in gross margins and lower operating expenses, we believe earnings estimates will likely be revised modestly upward, following the Company's earnings announcement.
Risks: Obvious risk factors for Xicor include a high concentration of revenues in the communications markets, recent acquisitions, competition from larger industry players, as well as the timing and degree of success of new products. |
