Metalink Taking On the WLAN Chip Giants (MTLK, BRCM, MRVL, ATHR)

 |  Includes: ATHR, AVGO, MRVL, MTLK
by: Shlomi Cohen

Metalink (Nasdaq: MTLK) is a broadband and digital home stock that I hold in my portfolio. Like Orckit, it has a good chance of making a breakthrough by next year, but carries substantial risk. The stock has risen 50% since November 2005, despite its heavy current losses and the fact that it has not made a single dollar in sales in its own cutting edge field - the WLAN chip market.

As in the case of Orckit and its KDDI contract, investors are quietly picking up Metalink shares without any fanfare, and the first analysts are beginning to discover it.

On June 2, the small but well-known technology investment house Think Equity Partners LLC, published a ‘Buy’ rating for Metalink and set a target price of $9 a share. It said that Metalink had already won contracts to supply wireless chips to the HDTV home market, with commercial shipments to begin in mid-2007.

The chip in question complies with the new 802.11n standard that has not yet received final approval. When I talked to him several months back, Metalink CEO Tzvika Shukhman said of the new chip, “I launched an intercontinental missile four years ago and I hit the target.” Think Equity analyst Anton Wahlman agrees with Shukhman and believes that, despite the tough competition that Metalink will face from giants such as Broadcom (Nasdaq; BRCM), Marvell Technology Group (Nasdaq: MRVL) and the aggressive Atheros Communications (Nasdaq: ATHR), there will be enough room in the market for everyone.

Wahlman predicts that Metalink will supply 4.8 million wireless units at $8 per unit in 2007, and that this will rise to 13 million chips in 2008.