Cavium Networks, Inc.NASDAQ
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
Tue, Nov. 1, 4:24 PM
Mon, Oct. 31, 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
- Cavium Networks (NASDAQ:CAVM): Q1 EPS of $0.25 in-line.
- Revenue of $101.88M (+0.9% Y/Y) misses by $0.13M.
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.