| | | Investors just need to read the last EZ conference call transcript, the last EZ corporate presentation, the latest Linley presentation, and the original merger talk and presentation by Mellanox. These presentations were all before the proxy fight and show the true direction and thoughts of EzChip. They were all very positive and confident in the NP5,the NPS, and TileMX and future of EZ in the upcoming SDN/NFV telecom and data center.
These new releases are just coming out due to the fact that EZ sees the proxy fight being difficult with a large number of no votes. They are just emphasizing all possible negative points which are already known and minimizing the positive. These are more like the sec releases on every company where they all sound like they are going bankrupt. There was no intention to release anything like these until the no votes and Raging Capital
came into the picture. The GG board had a person who talked directly to Eli after the merger inform us that he stated that no new negative events have occurred since the last conference call and no new ones are know to be developing. The GG board was also informed a couple weeks ago about the number of no votes between that board, one other board, and Raging Capital and the number is very high. EZ is obviously willing to put out such negative releases due to these votes.
The NP5 designs are locked in with revenue ramping for the next three years. These will drive revenue and earnings significantly over the NP4 with the 50% higher ASP and data center wins. These wins will not be lost and the level of success will be mainly dependent on overall market conditions which are improving after a long edge router downturn. Just the ASR 9000 selling into the datacenters like google will provide a large revenue increase. One study showed that one hyperscaler upgraded to custom 40G switches and would have been the third biggest switch vendor that year. The hypersale market is massive and the NP5 gets EZ into that market. These NP5 wins and revenue projections have never include Juniper or Alcatel. I for one never thought the NPS would win the edge router at ALU and Juniper was always only a possibility. The NPS will be targeting many other designs at these companies outside the edge routers.
The NPS had 3 tier ones and other wins before tapeout even occurred and EZ has stated multiple times that the TileMX is getting excellent feedback from customers. The telecom and data center world are moving toward sdn and nfv where software is the key. Go check out CenturylInk,AT&T and others with huge virtualization goals. Just google SND and NFV news and see hundreds of release and surveys projecting huge growth. Programmability, flexibility, speed to market, lack of ties to proprietary hardware and operating systems, white boxes, scale out ability, and other factors are keys to this movement. These factors are completely opposite to what ASICs provide. SDN/NFV will move away from asics to fully programmable chips and white box solutions. The current paradigm of long asic design cycles with huge costs. monolithic hardware with redundancy, dozens of different boxes and limited programmability with long waits for proprietary OS updates are going away. One recent study showed every network engineer is now responsible for something like 59 boxes which has risen dramatically. The CAPEX and OPEX of the current paradigm are unsustainable. These will be replaced by fully programmable boxes where scale can be made by dropping in new boxes like the hyperscalers do with servers. New virtual functions can be added constantly and run on programmable hardware and bugs fixed quickly. Currently most of nfv/sdn demos are on intel chips due to programmability but the NPS and TileMX will bring that programmability to chips optimized for networking with magnitudes of better performance and huge savings in performance per watt/GB or any other measure. These chips are also highly differentiated and more powerful than other merchant silicon.
Like I said in my last post I do not doubt a combined EZ/Mellanox would be more powerful than separately but I feel that the sale is at the weakest time for EZ with many good years to come. I feel these companies have wanted to do a merger and the large cash buildups at both companies over the last years along with EZs difficulties leading to a low stock price gave them this opportunity that probably will not exist when the NP5 starts ramping and more is known about the NPS. The price does not include all the time and research and upside in the NPS and TileMX. Eli and Eyal are clearly good friends and this purchase is about the NPS and TileMX. The NP5 is legacy but will provide a lot of revenue but is not the future. If the future was so dire Mellanox would not be purchasing EZ at all and would not have had such positive things to say. As an EZ shareholder I feel I will get much more value with EZ as an independent company. EZ can still sell the TileMX and NPS chips to Mellanix and do hardware collaborations. Plus, Mellanox came out with positive news on earnings the day after the merger which caused the stock to go up 10$ since that point which made it very difficult to switch from EZ to Mellanox. If the deal was in stock and not cash so we would not have to pay taxes and we would be participating in the Mellanox stock runup then there would be a much less determined proxy fight. |
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