Newport Gets New Coverage; QLogic Asks: ‘What Slowdown?’
If anyone’s noticed that Newport Beach-based Conexant Systems Inc. has lost its appetite for acquisitions, they aren’t whistlin’ Dixie. As Wall Street sours on chipmakers, Conexant has gotten off the buying binge in the past few months and most likely will stay that way for the next few months, says a Conexant spokesman.
“Our pace of acquisition has slowed,” said Conexant’s Scott Allen. “I would never want to say we weren’t going to make an acquisition, but we haven’t made an acquisition in some number of months.”
Allen said that, even though most of Conexant’s recent acquisitions have been stock swaps, the company also would consider other ways to structure deals in order to gain access to technology it needs to grow.
Still, with about 10 deals under its belt in the past year and a half, Conexant is working to digest its earlier meals.
“When you acquire a company, you have to assimilate it to assure efficiency and success,” Allen said. “Right now we’ve got companies that are geographically diverse. There are also company culture issues and systems issues when you acquire companies.”
Conexant’s management will leave the door open to take in more companies should the need arise.
“We have a team of folks that evaluates promising deals,” Allen said.
Newport Shares Bounce
A look at Irvine-based Newport Corp.’s stock on Feb. 14 might bring back visions of the dot-com moonshots of the late 1990s. The company’s stock shot up 9 points on Valentine’s Day on the news that another investment bank,New York-based Jesup & Lamont Securities Corp.,would begin covering the company. Moreover, Jesup & Lamont suggested Newport’s stock could trade as high as 80 in the next 12 months, up from about 57 last week.
Jesup & Lamont’s announcement followed an earlier one by Robertson Stephens analyst Sue Billat, who said Newport stands to see healthy growth as more computer component makers need to test more complex chips and boards. As they do, Newport should continue to sprout.
“The equipment tool set in use today, mostly built in-house by component makers, is inadequate to keep pace with the changing requirements for devices of higher performance and more complexity, in our view. As a result, leading component makers have started to outsource the manufacture of their fabrication equipment to (original equipment manufacturers) such as Newport,” Billat wrote in her report.
QLogic CFO: Not Seeing a Slowdown
While a faltering economy has sacked many technology companies, Aliso Viejo-based QLogic Corp,, a maker of gear for large storage networks, isn’t seeing the same thing, says chief financial officer Thomas Anderson.
“We don’t want to say never, but we are pretty diversified. It would take a broad range of things to happen for us to slow down,” Anderson said.
In the past four quarters, the company has posted profits that have surged 70% or more annually. While QLogic’s OC rival Emulex Corp. saw its revenue jump 90%-plus annually for the past four quarters, the company also said its customers were waiting to order its parts until later in the year. While analysts say that technology companies are taking up the slackened reins this year, Anderson says it’s still full speed ahead.
Anderson said he expects the economy to rebound from the current slowdown in six months.
Myrient Aims to Break Even in a Year
Fresh from $6 million in funding, Aliso Viejo-based Myrient Corp. plans to be profitable within a year, said Vice President of Business Development Barry Turbow. “It should get us to profitability within a year, but we’re looking to do it immediately,” he said.
In fact, Myrient, a provider of data and networking services, has been on a roller coaster for the past year. Last fall, the networking service provider laid off all but about 59 of its staff,about 140 employees. Most of the layoffs were a part of its sales organization that targets retail accounts. As a part of the company’s effort to be profitable, Myrient’s management shuttered 33,000 square feet of office space in Irvine in favor of a modest 16,000 in an Aliso Viejo office park.
“We just got too big for our britches,” said Turbow, who estimates the market for Myrient’s products will grow to $3 to $4 billion by 2004. “We want our piece of that pie,” he said.
Broadcom’s Woes
Broadcom Corp., Irvine, found itself on the wrong end of the stick when Lehman Brothers analyst Arnab Chanda cut estimates for the chipmaker by 19%. Broadcom wasn’t alone though,Chanda cut estimates for component suppliers Applied Micro Circuits Corp. of San Diego by 15%, San Jose-based JDS Uniphase Corp. by 9% and Campbell-based PMC Sierra Inc. by 18%.
“It may take some time before the component suppliers see demand improve,” Chanda said.
