For years we envied the Finns, and asked ourselves when there would be an Israeli Nokia (NOK). With the launch of his brainchild the iPhone six years ago, Steve Jobs dealt a mortal blow to the Finnish empire, which has been dying ever since, finally succumbing, officially, last week.
Indirectly, not only did Jobs cure our envy, but his invention set off a wave of new start-ups developing applications, some of which, such as Waze for example, have reached dream exits.
Apple, for its part, has not finished the task. A week after Nokia's dramatic announcement, Apple will launch a special iPhone for the huge Chinese market, where, until a few years ago, Nokia sold hundreds of millions of simple handsets a year, and, as it did in the rest of the world, failed to realize in time that there too they want smartphones these days.
Among Israeli stocks, Nokia is an important source of royalties for Ceva Inc. (Nasdaq:CEVA); LSE:CVA), via its semiconductor suppliers, and investment bank William Blair has cut its recommendation for Ceva from "Buy" to "Neutral", because it believes that the sale of the Nokia division raises the level of uncertainty. The main reason for the downgrade, which cost investors 10% off the share price, was a large customer of Ceva, Broadcom (BRCM), which announced that it was buying the LTE processor business of Japanese chipmaker Renesas.
I see no sense in this downgrade, and in my view another opportunity has been created for investors to get into Ceva more cheaply, in advance of the renewal of sales and profit growth next year. In July, Ceva had already taken a hit from Broadcom's postponement of LTE chip launches, with its share price falling from the $21 level. If the William Blair analysts fear that Broadcom will abandon Ceva further down the line, they are making a mistake.
Although Renesas's LTE chips are not based on Ceva, it could be understood from Broadcom's CEO last week that Renesas's LTE chip line was not meant to replace existing supplies, but to accelerate development efforts, with the aim of bringing Broadcom's LTE processors (developed on the basis of DSP from Ceva) more quickly to market, to compete with current market leader Qualcomm (QCOM).
Incidentally, Renesas is also a Ceva customer, but in other areas, on which it will focus in the coming years, such as processors for driverless cars, which means that Renesas did not have good DSP solutions of its own in-house.
The fear that the acquisition of Nokia will harm Ceva also makes no sense, because Nokia is much better for Ceva when it is backed by Microsoft than as an independent customer making heavy losses.
EZchip's following wind
The return to work after the summer vacation has brought with it a resumption of investor conferences, and among the Israeli stocks that I hold here, Ceva, Mellanox Technologies Ltd. (Nasdaq:MLNX) and EZchip Semiconductor Ltd. (Nasdaq: EZCH; TASE:EZCH) will present at the Deutsche Bank Technology Conference in Las Vegas on Tuesday.
EZchip is presenting today at a small conference of thirteen semiconductor companies from different niches organized by Roth Capital in San Francisco. The conference will focus on today's most interesting areas: mobile, and cloud computing infrastructures. In the latter field, EZchip's new NPS chips will arouse considerable interest at this conference, even though sales will only start in another two years.
EZchip comes to this week's conferences with a following wind, thanks to an upgrade to a "Buy" recommendation and a $32 price target from Chardan Capital on Friday. The share price has slid back since the strong results released in early August, because of the somewhat pessimistic statements from Cisco (CSCO) CEO John Chambers, although he specifically mentioned strong growth in routers, which are known on the market to be based on EZchip processors.
In my view, EZchip position is stronger than ever, because besides strong sales to Cisco and a revival at Ericsson (ERIC), its two Chinese customers, ZTE and Huawei, are expected to accelerate orders soon. This should happen, because, in their second quarter reports, all the Chinese mobile carriers mentioned stepping up the pace of investment in network infrastructure in the second half.
To end, another company presenting at the Roth Capital conference is QuickLogic (QUIK), a small US semiconductor company, a sort of dream company, which I have held here for a long time, in the hope that it will succeed in penetrating the market of the major smartphone and tablet producers. The company has unique solutions for improving viewing quality while saving energy, and it recently reported that its solution was being used on Samsung's new tablet, a stage that, when dream companies reach it, I define as the train leaving the station.
Published by Globes [online], Israel business news - www.globes-online.com - on September 9, 2013
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