<<It looks like a great model with an amazing amount of leverage once the royalties
begin to flow.>>
I'm long on ARTI for a while already, and besides, I personaly work for one of their competitors in this field.
Their model is great, however, there is one risk here to be considered:
- Larger customers, who produce chips in volume, most of the time prefer to buy library of the shelf from their competition. It turns out to be cheaper, then paying royalties, because royalties are still build into manufacturing costs by the foundry.
Statisticaly large customers, like Motorola, for example, generate 80% of the total chips production volume. Therefore ARTI's main customer base is the rest 20% of smaller design houses (which is also a lot). This means that revenues may not be as big as expected.
Besides competition in the library business is brutal.
So I wouldn't bet a farm on it just yet. I want to see how they will develop their business, and wait till the revenue results for the next couple quarters.
On the bright side, they are a potential aquistion target, either for a design shop, who is willing to get into a library business, or for a foundry, who wants to add value services to their customers.
Can you please elaborate on their presentation a little?
Thanks. |
