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Technology Stocks : EZchip Semiconductor -- Ignore unavailable to you. Want to Upgrade?

To: techsavy who wrote (2596)	12/16/2015 4:52:51 PM
From: The Ox	2 Recommendations Recommended By GCD1 PaulAquino Read Replies (1) \| Respond to of 2675

Silly me, I thought that the acquisition of Tilera was a good thing - now it sounds like EZCH got taken to the cleaners by buying a product line which apparently they don't know how to sell. Life is just too hard for EZCH management to continue. Color me skeptical. Keep in mind the MLNX offer is for 8 times sales...... These were a few of my comments made back in January of this year: Let's not get too far out in front of the EZCH/Tilera deal. First, if you look at the analysts' expectations for next year revenues, we're only seeing a 40% increase at this point in time for the new, combined entity. So while the addition of Tilera is a plus, it's not like they are adding a ton of revs at this stage of the game. EZCH alone was growing revs in the neighborhood of 25% per year, so we are not seeing the estimates rise all that much, IMO. Cash per share was over $7 BEFORE the deal and may fall to $3/share by the time all the incentives are paid out to Tilera. Another way to look at the way EZCH is trading is that the $4/share in cash that's being given to Tilera's owners has come out of the stock's price, the drop from $23/share to the current $19/share. At a market cap of $565MM and forward sales projections for next year of $120MM, the stock is trading a little less than 5 Price to Sales ratio. IMO, this is not out of line and probably a bit low for a company with their potential. Lastly, the analysts are showing EPS expectations for next year to be flat with this year's. We'll have to see how much share dilution occurs over the course of next year and how much it will cost in earnings to merge these two entities. If they can show accelerated bottom line improvements, faster than the street is currently expecting, I think we'll see the stock appreciate substantially. The main caveat is how fast does the new company show the expected synergies? Mergers usually take a few years to truly reap the benefits of the combinations and to reach up to the expectations from the beginning of the process. and.... One of my points was that EZCH WAS growing at 25%. I'm not sure we should assume they were going to grow at 25% this year without Tilera. In fact, they are in a product transition and that can lead to lower sales during the short term as less product from prior lines gets sold. It's possible that Tilera could generate enough revenue to make their bonus money and the combined company may only reach the $120 million sales level. In fact, I'd even suggest that's what the stock price is implying. I'm in the "show me" camp. I think there is a lot going on at EZCH to be excited about, especially with respect to the long term future of their target markets. I think EZCH appears to have used their cash wisely but they will need to show this is true by generating effective numbers going forward.