In an article embargoed until 10:15AM ET Saturday, SA Pro contributor/fund manager Edward Schneider argues CEVA's (CEVA +3.2%) efforts to grow its DSP core IP business within non-mobile markets could lead shares to double within 18 months.
Shares are at the highest levels they've seen since September. They crashed in October due to a Q3 warning.
CEVA (CEVA -12.8%) is ending the day with huge losses after Broadcom, which uses CEVA's DSP cores in its baseband chips, missed Q2 estimates and issued light Q3 guidance, while blaming the shortfall in large part on light baseband sales. Chip stocks on the whole have had a bad day (SOXX -1.8%), as Broadcom's numbers and a ho-hum report from ARM overshadow Apple's FQ3 beat. SIMG -3.8%. OVTI -2.8%. MU -3.9%. SNDK -2.4%. IMOS -4.5%. Broadcom set-top chip rival STMicroelectronics (STM -2.7%) has fallen for the second day in a row following its Q2 report and soft Q3 guidance, aided by a downgrade to Underperform from BofA.
Ceva (CEVA -14.3%) tanks after providing light Q1 guidance - revenue of $12M-$13M and EPS of $0.13-$0.15 vs. a consensus of $14M and $0.22 - to go with an in-line Q4. The DSP core/SoC licensing firm is suffering from declining sales of 2G phones that rely on baseband chips featuring Ceva's IP, as well as lower ASPs for those chips.Ceva, which has licensed its designs to Intel, Broadcom, Spreadtrum, and ST-Ericsson, is counting on 3G/4G smartphone sales to fuel a 2H royalty rebound.
MIPS has resumed trading following news of CEVA's offer for its CPU core licensing business, and is currently up 5% AH. That translates into nearly a $20M increase in market cap even though the difference between CEVA and Imagination's (IGNMF.PK) offers is only $15M. The Street seems to think a bidding war is on the way.
MIPS discloses it has received an unsolicited bid from CEVA to acquire what will remain of the company after a patent sale to an ARM-led consortium is finished for $75M in cash. That trumps a $60M offer from GPU core developer Imagination (IGNMF.PK). MIPS' board is evaluating the offer. If CEVA's offer wins out, MIPS' CPU core business would complement CEVA's DSP core business, and could also yield synergies for its chip platform business. MIPS halted. CEVA -0.6% AH. (PR)
Will MIPS' (MIPS +3.8%) efforts to find a buyer soon bear fruit? Benchmark's Gary Mobley thinks so: he claims a meeting with management left him remaining confident the CPU core developer/patent holder's "assets will be broken up and sold within the next four months." Mobley, who has a $10 PT, sees U.K.-based graphics core developer Imagination (IGNMF.PK) as the most logical buyer, but thinks a bid from ARM (ARMH), CEVA, or Synopsys (SNPS) is also possible.
Ceva (CEVA -18.3%), a developer of DSP cores used in mobile baseband chips from Broadcom, Intel, and others, is making new 52-week lows after issuing soft guidance to go with its Q1 beat. The company now expects 2012 revenue of $57.2M-$61.2M and EPS of $0.87-$0.99, below a consensus of $63.8M and $1.02. Ceva blames the impact of Nokia's plunging market share, which has also taken a toll on Texas Instruments' (TXN) chip sales.