Atheros Stock Rises On Strong Earnings, Outlook

Shares of Wi-Fi chip maker Atheros (ATHR) are rising after hours after it said third quarter sales just slightly beat analysts’ estimates, rising 74% from the year-earlier period and 9% from the second quarter to $79.6 million, ahead of the consensus estimate of $79 million. Profit, excluding some charges, rose to 19 cents a share, about a penny higher than estimates.

The outlook sounded good, too: the company expects sales in the fourth quarter to rise by as much as 9%, the company’s executives said on a conference call with analysts after the results were announced. That would put sales at about $86.76 million, ahead of the mean estimate of $84.5 million and near the top range of estimates. Profit per share will be in a range of 19 cents to 20 cents, the company said, which puts Atheros right around the mean estimate of 19.5, according to First Call.

Separately, Atheros said it will acquire a company called Attansic, which makes chips for gigabit ethernet, the fastest kind of corporate computer network wiring. Atheros expects 100% of all Wi-Fi routers will have to have gigabit ethernet connections to the Internet by 2008, the company said in a statement, hence the need to add these chips to its toolbox. Terms of the deal were not disclosed. Atheros expects the deal may be slightly accretive to earnings next year.

The company said shipments of Wi-Fi chips should rise at a double-digit percentage rate in the fourth quarter, especially chips for the fastest kind of Wi-Fi, dubbed 802.11n. A big part of that will be shipments inside of laptop computers, the company said.

Atheros shares rose as high as $20.65 in the after market, or 3% above their earlier close of $19.99.

Related: Atheros Communications Q3 2006 Earnings Call Transcript

Comments

[Rt Og:]

At the CC the company said that it expects ales in the fourth quarter to rise by 6-9% (not 9%) which could also put it well below consensus estimate depending on where in the range the sales are going to be.

2006 Oct 24 03:48 AM

[CrossProfit_:]

P/E now at X40 and Q4 report due out EOM will show flat earnings on 7-8% sales increase compared with Q3 due to charges. Attansic acquistion details not disclosed in full as of today leaves a-lot of unanswered questions...this stock is getting ahead of itself and could be heading for a big correction. Looks like pump before earnings... be careful.

(CrossProfit website is down until the end of the month. All urgent notices posted on SA, in short comments.)

CrossProfit

2007 Jan 11 11:22 AM

[CrossProfit_:]

We expected earnings to be flat. GAP earnings came in at -0.02. Analyst consensus was for +0.20. Revenue was up 10%, our estimate was 7.5%. The earnings ‘surprise’ was due to (acquisition[$?] and stock option) charges. Anyone reading SA, wasn’t surprised!

Breakdown of Attansic acquisition (between cash and stock) should be available shortly.
Only upon reviewing all the info will we be able to decide if a ttm PE of 40-45 is justified. What transpired in Q4 may repeat in 2007. On the other hand it may be a one time occurrence. We simply don’t know yet.

(CrossProfit website is down until 2/15/07. All urgent notices posted on SA, in short comments.)

CrossProfit

2007 Jan 29 09:14 PM

[CrossProfit_:]

Finally, some facts and figures! 11.4M is non-recurring, albeit, management has rewarded themselves handsomely for an outstanding year. After taking into account the acquisition expense, profits are up over 100% on a Q4 2006 to 2005 comparison. We anticipate that this will repeat in Q4 2007, both in stock options totaling 25% of ANNUAL profits and latest acquisition expensing to run its course throughout 2007.

ATHR should be able to sustain growth and profitability and generate positive cash flow. 2006 FY results put ATHR in the 60-65 ttm PE range, which is a bit high. This may be warranted if ATHR produces an EPS of 0.25 or above in Q1 2007, which is usually the weakest quarter. For now, a price range of $20 to $23 is more realistic.

Remember, this management team (certainly has proven that they know what they are doing) will bill shareholders 25% of all profits. Any growth should be calculated at 75% for the shareholders.

(CrossProfit website is down until 2/15/07. All urgent notices posted on SA, in short comments.)

CrossProfit

2007 Jan 30 04:25 AM