Cavium Still Navigating Lofty Expectations
Stephen Simpson, CFA • 17 Comments
Stephen Simpson, CFA • 17 Comments
Cavium Networks Has The Right Exposures, But It's Priced Like It
Stephen Simpson, CFA
Stephen Simpson, CFA
Cavium Networks - Beat, Raise, Repeat
Stephen Simpson, CFA
Stephen Simpson, CFA
Yesterday, 5:35 PM
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Wed, Jul. 6, 3:00 PM
Thu, Jun. 16, 3:04 PM
Thu, Jun. 16, 9:17 AM
Wed, Jun. 15, 5:32 PM
Wed, Jun. 15, 4:17 PM
- Cavium (NASDAQ:CAVM) is buying server/storage connectivity hardware and chip provider QLogic (NASDAQ:QLGC) for an equity value of $1.36B, or an enterprise value of $1B after factoring QLogic's $355M cash balance. The buyout price is equal to $15.50/share, a 14% premium to QLogic's Wednesday close.
- Cavium is paying $11/share in cash and issuing 0.098 shares for each QLogic share. The deal is expected to close in Q3.
- Cavium: "QLogic's leading portfolio of advanced connectivity and storage solutions is highly complementary to Cavium's extensive portfolio of networking, compute, and security solutions. The combination enables Cavium to offer a complete end-to-end offering to customers in Enterprise, Cloud, Data Center, Storage, Telco and Networking markets."
- The deal is expected to boost Cavium's 2017 EPS by $0.60-$0.70, and to yield $45M/year in cost synergies by the end of 2017.
- QLGC +12.3% after hours. Investors could be betting a higher offer will arrive.
- Update (6:38PM ET): Cavium is down 7.3% after hours.
Wed, Apr. 27, 9:55 PM
- Though Cavium's (NASDAQ:CAVM) Q1 results were roughly in-line, the network processor developer guided on its earnings call for Q2 revenue of $105M-$108M and EPS of $0.28-$0.30, below a consensus of $110.6M and $0.32.
- Cavium says it expects sales related to the access and service provider markets to be "flat to down due to some delays in volume infrastructure and Asia." Enterprise/data center sales are expected to be up in spite of a soft enterprise macro environment, with new data center products (for example, Cavium's ThunderX ARM server SoCs) driving growth. Broadband-related sales are expected to be flat to up.
- The guidance was delivered on an afternoon that also saw optical networking hardware firm Infinera and FPGA developer Xilinx (has strong telecom equipment exposure) provide soft guidance. Ericsson, Juniper, and Ciena are among the other telecom-exposed firms to have issued weak results and/or guidance over the last two months.
- Cavium finished after-hours trading down 8.2% to $53.00.
- Cavium's Q1 results, earnings release
Wed, Apr. 27, 4:12 PM
Tue, Apr. 26, 5:35 PM
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Fri, Mar. 11, 1:21 PM
- Optical component vendors Fabrinet (FN +6.3%), Alliance Fiber (AFOP +3.8%), and NeoPhotonics (NPTN +4.6%) are rallying after Finisar (FNSR +18.3%) posted mixed FQ3 results, offered in-line FQ4 sales guidance and above-consensus EPS guidance, and forecast datacom sales would pick up as Web 2.0/hyperscale clients deploy 100G transceivers. Telecom chipmakers Inphi (IPHI +3.8%), Cavium (CAVM +3.9%), and AppliedMicro (AMCC +4.4%) are also doing well. The Nasdaq is up 1.3%.
- Craig-Hallum's Richard Shannon and B. Riley's Dave Kang have upgraded Finisar to Buy. Shannon thinks the FQ4 guidance suggests Finisar could be reaching a turning point, and sees 100G component adoption providing a margin boost. Kang is also upbeat about 100G sales.
- Piper's Troy Jensen (Overweight rating, target hiked by $3 to $20): "The upbeat FQ3 results and forward guidance were driven by robust demand for 100G Telco and Datacom optics. We believe telco strength continues with demand from China driving near-term upside and U.S. metro deployments will act as a tailwind in the back half of 2016 ... We also believe Finisar is one of the first to materially benefit from the 100G Datacom cycle, and expect QSFP28 [100G transceivers] to grow meaningfully for the next several quarters. We are expecting the real QSFP28 inflection to begin in 2H16, and believe this accelerated demand will be reflected in the July quarter guide."
- On the earnings call (transcript), CEO Jerry Rawls stated Chinese demand is benefiting from long-haul and wireless buildouts by the country's big-3 carriers, North American demand from metro buildouts, and broader telecom demand from sales of wavelength selective switches, ROADM line cards, and 100G/200G transceivers. He added Finisar is capacity constrained for the aforementioned products, and is building capacity to address the issue.
- Component makers rallied last month in response to good numbers from Oclaro and Fabrinet.
Fri, Feb. 12, 1:45 PM
- Cavium (CAVM +9.6%) CFO Arthur Chadwick discloses he bought 20K shares on Tuesday at $47.77, raising his stake to 68,172.
- The network processor/ARM server CPU developer is posting big gains a day after making a fresh 52-week low of $45.59. Shares rose two weeks ago after Cavium posted nearly in-line Q4 results and better-than-feared guidance, but soon gave back their gains as markets sold off.
Thu, Jan. 28, 8:25 AM
- Cavium (NASDAQ:CAVM) used its earnings call (transcript) to guide for Q1 revenue of $101M-$103M and EPS of $0.24-$0.26, almost entirely below a consensus of $103M and $0.27. However, expectations were low following light outlooks from various chip industry peers and telecom equipment firms.
- Enterprise-related chip sales are expected to be up slightly Q/Q, and data center-related sales lower. Broadband-related sales are expected to be flat to up.
- Regarding 2016, Cavium says it's "starting to see stabilization and growth return to the service provider markets, driven primarily by an improving wireless infrastructure market environment" - wireless sales were pressured in 2015 by weak Chinese 4G infrastructure demand.
- Cavium also predicts product ramps for its core Octeon network processor line and Nitrox security processor line will provide a 2016 lift. "Meaningful volume shipments" continue to be promised for the closely-watched ThunderX ARM server CPU line.
- Cavium's Q4 results, earnings release
Wed, Jan. 27, 4:10 PM
- Cavium Networks (NASDAQ:CAVM): Q4 EPS of $0.28 in-line.
- Revenue of $100.9M (-0.3% Y/Y) beats by $0.51M.
Tue, Jan. 26, 5:35 PM| Tue, Jan. 26, 5:35 PM | 26 Comments
Thu, Jan. 21, 4:17 PM
- Chip stocks fared well (SOXX +1.5%) on a day the Nasdaq was nearly flat. The gains came after FPGA maker Xilinx (XLNX +8.6%) beat calendar Q4 sales estimates, issued solid Q1 guidance, and published an 8-K filing that has fueled hopes the company will join the ranks of chip firms to be acquired during the industry's M&A wave.
- Also: Microcontroller and SRAM/NOR flash memory maker Cypress Semi (CY +7.6%) affirmed its Q4 guidance against a backdrop of low expectations.
- Seeing the biggest gains was AMD (AMD +16.1%), which is two days removed from providing weak Q1 guidance to go with a Q4 sales beat. In spite of the guidance and the largely downbeat analyst commentary that has followed, AMD is now up 7% since the Q4 report arrived. Short-covering is likely helping - 120.4M shares (19% of the float) were shorted as of Dec. 31.
- Small-cap Xilinx rival Lattice Semi (LSCC +10.8%) was also a standout. Lattice (like Xilinx) has seen its share of M&A speculation, and CEO Darin Billerbeck has suggested he's open to a sale.
- Other notable gainers include Cavium (CAVM +3.6%), Silicon Motion (SIMO +3.7%), and Knowles (KN +6.5%) - Cavium is exposed to some of the same end-markets as Xilinx. MagnaChip (MX +13.9%) jumped two days after making a positive Q4 pre-announcement. Beaten-down Micron (MU +8%) also rallied strongly, possibly aided by a bullish Morgan Stanley note.
- On its earnings call (transcript), Xilinx mentioned the automotive market (a strong point for many chip companies, as chip content within cars steadily grows) is expected to see record sales in calendar Q1, and deliver 30% sales growth for FY16 (ends in March). Mobile infrastructure-related sales are expected to rise Q/Q, but deemed unlikely to reach a March 2014 peak anytime soon. CEO Moshe Gavrielov: "[E]verything until 2020 is likely to be of a smaller scale and the next big surge will be driven by 5G."
- Chip ETFs: SMH, XSD, PSI, SOXL, USD, SOXS, SSG
Wed, Jan. 6, 5:52 PM
- Amazon's (NASDAQ:AMZN) Annapurna Labs chip unit, acquired a year ago for a reported $350M, has unveiled (amid CES) a set of 32-bit and 64-bit ARM-based (NASDAQ:ARMH) processors for home gateways, Wi-Fi routers, and NAS storage appliances, along with related subsystems.
- The chips, to be sold under the Alpine label, target a low-end networking/storage processor market in which Marvell (NASDAQ:MRVL), Cavium (NASDAQ:CAVM), Intel (NASDAQ:INTC), and Broadcom (NASDAQ:BRCM) are notable players. Annapurna suggests the Alpine line will be differentiated in part by offering superior general-purpose computing power, thus allowing it to support more higher-level services. It also promises Alpine will support 4K video streaming 10G Ethernet and PCIe Gen3 connectivity, low power consumption, and enterprise-class reliability.
- Asus and Netgear plan to use Alpine. To date, Amazon has been tight-lipped about its plans for Annapurna. There has been speculation the Israeli chipmaker will develop low-power ARM server CPUs that will go into AWS' data centers. For now, AWS continues relying on Intel's x86 server CPUs.
- Earlier: AWS cuts cloud computing prices; Rackspace sells off
Cavium, Inc. engages in providing integrated semiconductor processors that enable processing for networking, communications, storage, wireless, security, video and connected home and office applications. It offers a portfolio of integrated, software compatible processors ranging in performance... More
Industry: Semiconductor - Broad Line
Country: United States
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