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Wireless chip meltdown at Sequans

|Includes: Sequans Communications (SQNS)

Sequans has been a sad IPO story pretty much from the start. The French 4G semiconductor firm selected an odd array of investment banks for their IPO (UBS, Jefferies, Baird, Needham, Natixis) and priced below the $11-13 range at $10 on April 15, 2011.

For a short while the shares did very well and traded in the $12-$16 range for a couple of months. Then the fundamentals started to deteriorate in late July when the company lowered guidance. After gapping down to $8 the stock has bumped lower since and went out yesterday at $3.55.

And then the big bomb dropped. Another lowering of guidance. This time to $11M in revenues versus the current lowered consensus of $21M.


 Their largest customer basically canceled half their orders for WiMAX chips and the LTE business has been slow to ramp. (And we’d point out very competitive.)

Today we expect estimates to be slashed and the current average analyst target price of $5 to be reduced.

From a valuation standpoint the company has net cash of $61M although the company will lose money this quarter. Management maintains that they are “encouraged by design wins and the general level of interest in their LTE solutions.” That’s not exactly a major vote of confidence. Anyone tracking this one will want to watch for major insider buying before getting interested in any potential recovery.

So far this is no management team to bet on. Thankfully we removed the small position we had in this name in the IPO Folio a while back.

[Disclosures: None]