TRPH - An interesting "story" about Tripath:
"One-Day Wonder
"Thin Is In
By Lawrence Carrel
December 1, 2003
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Tripath Technology Inc. (TRPH)
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Share price as of Friday's close: $4.67
Share price now: $5.68
Change: 21.6%
Volume: 4.6 million shares, daily average 1.3 million shares
Last time this high: July 19, 2001
52-week high: $5.84
52-week low: 16 cents
Forward P/E before announcement: n/a
Forward P/E after announcement: n/a
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LET'S HEAR IT for couch potatoes.
Shares of Tripath Technology (TRPH) jumped 21.6% to a two-year high of $5.68 on Monday after the San Jose, Calif., company's digital audio amplifiers were chosen to power Hitachi's (HIT) newest line of plasma televisions. The consumer-electronics giant's upcoming 32-, 37- and 42-inch models will run Tripath's Class-T TA2021B amplifier that cranks out 12 watts of stereo sound. Hitachi's current 50-inch plasma TV already uses an earlier version of the amplifier.
"Digital amplifiers are the new technology that will replace analog amplifiers in flat TVs," says Tristan Gerra, an analyst at Soundview Technology. "Hitachi was already a customer. And with these additional lines, it shows the company continues to gain traction in the digital-TV market. With the very strong growth prospects for digital TV, this should act as a catalyst for growth for Tripath."
Strong, indeed. While no revenue projections for the deal were offered, flat-panel TVs are considered one of the hottest items in the consumer-electronics arena. According to Sean Wargo, director of industry analysis at the Consumer Electronic Association, based in Arlington, Va., flat-panel TVs will see triple-digit growth this year over 2002 to around 660,000 units. That despite high prices that are keeping volumes low. Demand is expected to double each year through 2006.
Plasma TVs are all the rage because size, it seems, really does matter. Unlike old-fashioned televisions that require bulky picture tubes, flat-panel TVs use either plasma or liquid crystal display (LCD) technologies that allow for much thinner models with much wider screens. LCD works by passing current through tiny liquid crystals, while plasmas stimulate a captive gas with an electrical charge. LCD models run from $500 to $10,000, while plasmas start at nearly $3,000 and can cost as much as $20,000.
Digital amplifiers like Tripath's also help shrink the size of flat-screen TVs. These components are more efficient than analog amplifiers because they dissipate much less heat. By eliminating the need for cumbersome heat sinks, which analog amplifiers require, the digital systems can be built much smaller, making them particularly convenient for electronics with little extra room, such as mobile appliances and flat-screen TVs.
With flat-panel makers like JVC, Samsung, Sanyo (SANYY), Sharp, Sony (SNE) and Toshiba (TOSBF) among its customers, Tripath has a strong presence in the market. Flat panels account for 33% of its revenues, which hit $3.7 million during the third quarter. Tripath's amplifiers are also used in, among other places, home-theater systems, automobiles, personal computers, set-top boxes and DSL communications equipment. DSL currently makes up about 10% of the company's revenues and home theaters compose about 15% to 20% of sales.
Not bad considering the company's auditor said in March that it had substantial doubt about Tripath's ability to continue as a going concern. That warning was in response to falling revenues in the wake of Apple Computer (AAPL) canceling some Tripath orders. With the market questioning the viability of the business model and the company's ability to generate sufficient cash, Tripath's stock sank as low as 18 cents a share by April 21.
But things turned around on May 5, when Samsung selected Tripath's amplifiers to power three of its flat-panel products. Two days later, Alcatel (ALA) chose Tripath to be a supplier for its 24-channel DSL line card. Not only was this Tripath's first contract for DSL, but the company says it's currently the only vendor of digital amplifiers in the DSL field. DSL, or digital subscriber line, technology allows the high-speed transfer of data over traditional phone lines. With those votes of confidence, the stock has rocketed more than 3,000% since.
"We will have significant revenue growth next year," says Tripath Chief Executive Adya Tripathi, "and we should be profitable in the second half of next year." Tripath posted a net loss of $1.5 million, or four cents a share, for the third quarter. CEO Tripathi says the company has about $9 million in cash and is burning less than $1 million a quarter.
Last week, CashFlowNews.com, a Web site that tracks corporate cash flows, said Tripath's cash flow from operations, free cash flow and earnings before interest, taxes, depreciation and amortization had all hit three-year highs. For the third quarter, while all three were negative year-over-year, free cash flow showed a 53% improvement, cash flow from operations posted a 46% improvement, and Ebitda saw a 55% improvement.
Quote:
"There is a trend of analog-to-digital transition in the amplifier market, and Tripath is one of the few players in the market," says Soundview's Gerra. "Tripath is a leader with 20% of the overall digital-amplifier market, and 30% in flat TVs. It has enough cash to reach profitability. My estimate is they will break even by late 2004, and I estimate 17 cents profit in 2005." (Gerra doesn't own shares of Tripath; Soundview Technology doesn't have an investment-banking relationship with the company.)
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