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Color on Atheros Earnings: Impressive Transition To 802.11n Products

"I'm somewhat surprised by the muted reaction in after hours. The results are surely worth more than $0.20. I think the stock is headed higher today."

Perhaps it will head up today; however you do not mention the gross earnings ‘miss’ from +0.20 to -0.02! The miss is attributed to current Q4 stock options granted by the board to management, also recent acquisition is in the mix. We called 0 (zero) for Q4, so -0.02 is close enough.

Then again, perhaps the PE is just too high and a forward estimate of $1.00 for 2007 is unrealistic (closer to 0.80 in our opinion). Then again if it were to be $1.00, it would be reduced to 0.75 after the board got done granting new options.

PE multiples; 0.75 x 30 = 22.50, 0.75 x 40 = 30.00 If ATHR post 0.25 or more for Q1 2007, then 30.00 looks good by yearend. If ATHR posts 0.20 or less for Q1 2007, then 22.50 is at the high end.

CrossProfit evaluation line is pegged at 24 through 03/2007 (EOL). Rough calculation, 0.80 x 75% = 0.60, 0.60 x 40PE = 24.00, > note that we take into account the charges. Our colleagues somehow forgot to factor this in for Q4 2006. It makes a BIG difference on this stock. We are not talking about 0.5% of earnings. We are dealing with 25% of earnings!

Atheros Stock Rises On Strong Earnings, Outlook

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.)

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Atheros Stock Rises On Strong Earnings, Outlook

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.)

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Atheros Stock Rises On Strong Earnings, Outlook

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.)

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