O2Micro: Return To Profitability, Cheap Valuation And Hidden Treasure In The Balance Sheet

Aug. 11, 2020 9:49 AM ETO2Micro International Limited (OIIM)14 Comments
Sergio Heiber profile picture
Sergio Heiber


  • O2Micro has benefited from the stay at home/work from home pandemic response.
  • Cost cutting combined with improving sales has resulted in profitability.
  • The company partners with the elite companies in the industries that it serves.
  • The market has priced the stock at very low valuations.
  • There is unrealized treasure with appreciated real estate and stock equity not factored into the balance sheet.

O2Micro International Limited (NASDAQ:OIIM) is a Cayman Island based fabless semiconductor company engaged in power management products, predominantly intelligent lighting for televisions and battery management for everything from power tools to electric bikes.

O2Micro has been attempting to undergo a turnaround for several years with cost cutting measures and a focus on higher margin products. The company's quest for profitability has been accelerated by the stay at home response to COVD-19. Company Chairman and CEO Sterling Du said:

Our growth in the first half of 2020 has benefited from successful development of next-Gen products for Top Tier and OEM customers and a market focus on technologies supporting mobile and remote workforces, extended learning and in-home entertainment. Stay at home policies helped drive sales of higher end TV, monitors, power tools and electric bikes. We are optimistic that our business fundamentals are leading O2Micro back to long term profitability.

O2Micro has returned to profitability, sells at low multiples and has hidden value via ownership of appreciated real estate and stock.

Strategy And Products

The business plan is focused on collaborating with premier companies to create products that will have mass appeal. The company uses foundries such as CSMC, VIS, and TPSC to manufacture products. Subcontracting manufacturing allows the company to concentrate on product development and sales in a wide area of industries. The company spends almost a quarter of its revenues on R&D and about the same amount on SG&A.

Direct and independent sales efforts target the largest vendors in consumer electronics, computers, communication and automotive markets. The in-house engineer design team works with customers such as Acer, Black & Decker, Dell, Dyson, General Electric, Hewlett-Packard, Samsung Electronics, Sharp, Sony, Toshiba and others to develop new products and solutions for these products.

The company has no long-term contracts with any foundry, testing

This article was written by

Sergio Heiber profile picture
I write about and invest in mostly early commercial stage companies that have a large TAM and zero to little direct competition. I will provide updates on companies that I introduce as long as the goalposts set by management are met. Of course, there are always unforeseen developments more often in the microcap world than otherwise and there are macro conditions that are beyond the control of company management. I'm also not always right but I like the risk/reward characteristics of investing in micro-caps.My articles are reflective of my investment interests and hopefully provide readers with ideas that they can further explore. I tend to be on the long side and generally abstain from writing negative or short themes. Besides my articles on SA, readers can find my work at MicroCapClub.com and StockPick.app

Disclosure: I am/we are long OIIM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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