Why I Added Quicklogic to My Portfolio

Includes: ORBK, QUIK, UCTT
by: Shlomi Cohen

Last week the 2011 conferences season kicked off, and one of the most interesting was that of investment bank Needham & Company, which is represented in Israel by Clal Finance. Most of the companies at the growth stock conference were small on an American scale.

Generally, when a conference like this falls after the end of a quarter and before results are published, managers are faced with a problem. They can't refer to the actual results, unless they issue an advance notice - or warn before the public presentation - that they are going to talk about the results, and then they can talk freely.

Executives at Orbotech Ltd. (Nasdaq: ORBK) and Ultra Clean (NASDAQ:UCTT) - whose shares I own in my portfolio tracked by "Globes" - revealed at the conference the main points of their results and guidance forward, and their shares have reacted to the surprising and good news. Orbotech rose more than 10% to a high of $15, a level it hasn't seen in two and a half years, and Ultra Clean jumped no less than 37% by the end of the week.

Incidentally, the two companies have business ties with each other - Ultra Clean , a US subcontractor that assembles complex machinery, is putting together Orbotech's giant and expensive inspection platforms for checking flat panels in Shanghai.

Ultra Clean chairman and CEO, Clarence Granger, essentially told analysts covering his stock that they are not on target. They estimated on average a drop in revenue in the first half of 2011, compared with the second half of 2010. He predicts the opposite - growth.

Ultra Clean will have two relatively new growth engines this year - orders from Orbotech for new television factories being built in China, and orders from LED machine manufacturers, which only began to work with Ultra Clean on the level of pilot orders as a secondary supplier in 2010, and this year the company will pick up the pace.

If we add to that the veteran customers from the chip industry, like Applied Materials (NASDAQ:AMAT) and its rivals, which received a boost of energy from the bigger investment budget at Intel (NASDAQ:INTC), then Ultra Clean is one of the cheapest stocks in the equipment market, even after the gains of last week.


Today I am adding to the portfolio a relatively risky share, of Quicklogic (NASDAQ:QUIK), which I became aware of in recent months on the very professional forum of George Gilder. In addition to the forum, I was very impressed by the words of the new CEO of Quicklogic, Andrew Pease, at the Needham conference. I believe that if it succeeds with its new products, the company can grow to be a giant compared to its current size, a value of around $200 million.

We Israelis do not have great memories of Quicklogic, because about ten years ago it was one of several chip companies that invested in Tower Semiconductor (Nasdaq: TSEM) in return for a supply of chips. However, its business did not take off, nor did the business of the other investors, excluding SanDisk Corporation (Nasdaq:SNDK), and Tower was nearly wiped out. The new Quicklogic hopes to make inroads this year, with advanced solutions, to the hottest sector today, smartphones and tablet computers.

The mobile online world is based almost entirely on video content. Therefore, companies that will succeed in providing solutions for optimal viewing quality on the big screens of iPhones, iPads, and the like, while using the least amount of battery power, will win big. Quicklogic has these solutions, which already this year should yield significant sales. Toward that end, the company is reportedly collaborating with Qualcomm (NASDAQ:QCOM) on bringing the solutions to market.

Published by Globes [online], Israel business news - www.globes-online.com - on January 18, 2011 Reprinted on Seeking Alpha with permission © Copyright of Globes Publisher Itonut (1983) Ltd. 2011