Some chip analysts made a trip to Asia a few weeks back and returned with a fresh appreciation for Irvine-based Broadcom Corp.
A group of SG Cowen semiconductor analysts said in a recent research note that the chip sector is in good health and recommended buying Broadcom and five other chip stocks.
“We view data gathered in Asia confirming our positive outlook on Broadcom,” the analysts wrote.
The assessment came after the SG Cowen team visited 15 companies around Asia, including distributors, component suppliers and back-end assembly sites.
The meetings with the Asian companies showed “particular strength” in Broadcom’s core businesses,chips for gigabit Ethernet gear, wireless local networks and set-top boxes.
Analysts also see potential in emerging markets such as digital TVs and new cellular technology. These businesses could outpace the market by 20% in the next year, they said.
Already, Broadcom has been garnering a lot of positive attention from Wall Street.
In the past six months, Broadcom’s stock has shot up nearly 50% while the Philadelphia Semiconductor Index has managed a gain of about 10%.
A big reason for the bounce: In July the company blew past analysts’ estimates for both sales and earnings in the second quarter. The company also raised guidance.
The other five companies to get SG Cowen buy recommendations include Dallas-based Texas Instruments Inc., Sunnyvale-based Marvell Technology Group Ltd., Greensboro, N.C.-based RF Micro Devices Inc., Santa Clara-based PortalPlayer Inc. and Austin, Texas-based SigmaTel Inc.
A side note:
The analysts also said improving market conditions could benefit other companies, including Irvine-based Microsemi Corp.
Analysts said the healthy notebook market should help out Microsemi’s liquid crystal display inverter and light sensor businesses as well as the company’s amplifier business for wireless networks.
Speaking of Broadcom
A Broadcom rival, Fremont-based Ikanos Communications Inc., has filed to go public. The company, competing in the broadband piece of the chip market, hopes to raise $63 million by offering 6.4 million shares.
Ikanos plans to use the money for general purposes.
Ikanos makes chips for telephone companies that allow old copper lines to deliver fiber-like broadband speeds to customers.
But Ikanos is hardly the size of Broadcom and has a lot to prove.
The company got off the ground in 1999, but did mostly research and development until 2001.
Ikanos posted revenue of $4.1 million in 2002. By 2004, it had revenue of $66.7 million.
Still, through the first half of this year, the company had revenue of $31.5 million, about flat from the same period a year earlier.
The company hasn’t been profitable, though its losses have narrowed.
Tech Spending Comeback?
Technology spending is on the rebound, according to one staffing company executive.
And it’s not because of Sarbanes-Oxley, said Alex Salottolo, president of technology staffing company Structure Networks Inc. in Tustin.
Businesses are opening checkbooks to update their computer systems simply because it’s a good business decision, he said.
That’s a shift for the industry, said Salottolo, whose company helps with finding people to install those systems.
More than five years ago, big corporations slowed their spending on technology after the tech bubble burst around early 2000, he said.
That hesitancy to spend continued until 2002, when Congress passed the sweeping Sarbanes-Oxley legislation that finally pushed companies to upgrade.
Companies had to spend on software and computers to prove they had the “internal controls” to be in compliance with the legislation that was prompted after the scandals of Enron Corp. and others.
The spending on Sarbanes continued at a rapid clip for a few years. This year, many of the companies finished up their initial work on the new rules.
Today, they are turning their attention to their massive enterprise resource planning systems, which run key business functions, including finance and human resources.
“Now they can focus on how they can optimize their business systems,” Salottolo said.
Next Meeting: Laguna Hills
WebEx Communications Inc.’s only Southern California office is getting a bigger, permanent home.
The Santa Clara-based company, which specializes in online meetings, is moving out of some temporary space in Newport Beach to an 8,000-square-foot home down the road in Laguna Hills.
The company arrived in Orange County eight months ago and has grown to about 25 people and could add another five by the end of the year.t’s a strong central location between San Diego and Los Angeles counties,” said Brent Sapiro, national sales manager.
