Piper Jaffray Upgrades Atheros Communications (ATHR) to Buy

June 30, 2008 7:54 AM EDT

Piper Jaffray upgrades Atheros Communications (NASDAQ: ATHR) from Neutral to Buy with a $34 price target.

The firm said, "Checks indicate a pick up in market share in 802.11n at PC OEMs. We believe that Intel's issues with its 802.11n silicon is benefiting ATHR and the delay of the Montevina is turning out to be a net benefit for ATHR. We would expect that going forward Intel (NASDAQ: INTC) will decrease its subsidies for 802.11n much like they have for 802.11g and will increasingly focus on promoting WiMax. We're already above the street for this year ($1.35 and $519 million, versus $1.31 and $514 million consensus). We think there is likely upside to our estimates in Q3 and Q4."

Gross margins is the primary risk in the firm's view. However, Piper believes that ATHR has more cost reduction coming for its 802.11n product line. Also, the firm believes that revenue upside will likely exceed margin pressure in the second half.

Atheros is a fabless semiconductor company that derives the majority of its revenue from supplying wireless LAN chipset solutions to a variety of end markets.

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