Atheros Lands New Nintendo Contract

Lehman’s Romit Shah Monday morning raised his rating on chip maker Atheros Communications (ATHR) to Overweight from Equal Weight citing “a major design win” from Nintendo (NTDOY.PK) for the DS handheld game system as well as “solid momentum in the core business.”

He raised his 2008 EPS estimate to $1.40 a share from $1.16, well above the Street consensus of $1.19. His ‘07 estimate is $1, up from 98 cents. He set a price target on the stock of $39.

Shah says the new business from Nintendo should generate $72 million to $96 million in incremental 2008 revenue. He expects the existing business - which includes chips for WiFi, Ethernet and Bluetooth - to grow 10% next year driven by continued strength in 802.11g chips and higher uptake of 802.11n.

Atheros Monday morning is up 69 cents at $33.27.

ATHR 1-yr chart: