Centillium's Hard Road (CTLM)

Centillium Communications (NASDAQ:CTLM) is a semiconductor company that makes products that help improve solutions for the "last mile" of broadband including DSL, fiber to the home, and VoIP installations. The company does most of its business in Japan (65%) and DSL companies are its largest customers (82%). These markets are expanding, so they would appear to be a fertile place to do business.

Not so for Centillium.

Revenue for Q1 06 was $20.3 million, about the same as Q4 05, and up a bit from the same period last year when the number was $17.2 million. The operating loss for the quarter was $895,000, again very close to Q4 05.

The company has been doing a shrinking act over the last few years. Revenue in 2003 was $125 million. In 2004, $71.2 million, and last year $76.1 million.

At the end of the quarter, Centillium has cash and equivalents of $63 and no debt. During the period, the company also came to market with several new products for DSL, integrated VoIP and optical technology, and end-to-end fiber to the home solutions. But, it needs for these to sell well in the next two quarters to show it can rekindle revenue growth.

Centillium stock trades at $3.80. It hit its 52-week high of $5.13 recently. The low for the period is $1.90. Centillium has a market capitalization of $155 million, about 2.5 times sales, which makes it fairly cheap.

But, it is likely to stay cheap until it shows it is on its way back to a $125 million year again.

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at douglasamcintyre@gmail.com.

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