Brean Capital Maintains Buy on EZchip Semiconductor (EZCH) Despite the Loss of Cisco (CSCO) Platform

Brean Capital maintains a Hold rating on EZchip Semiconductor (NASDAQ: EZCH) following Q1 results. EZCH reported solid results, slightly beating Street estimates, but those results were overshadowed by Cisco's (CSCO) decision to develop an in-house ASIC, instead of using EZCH's NPS-400, says analyst Mike Burton.

Burton Commented on EZCH, saying, "The big story from yesterday’s release was the news that Cisco has decided to develop an in-house ASIC instead of using EZCH’s NPS-400 for its next-gen line cards. While the current routing platform is shipping with EZCH’s NP-5, and a successor is not likely to ship for ~3 years, the platform accounts for a meaningful 50-70k chips/year and a loss would require a handful of new large customers to replace. The Company noted that they currently have potentially large tier 1 customers in sampling with the NPS-400 but will not be able to announce design wins until Q3 at earliest. In addition, the Company is beginning to develop the NPS-1000 in parallel to CSCO’s efforts in hopes of regaining the slot."

Burton also added, "EZchip reported Q1 revenues/EPS of $26.9M (+20% Q/Q; +35% Y/Y)/$0.24, a $0.01 beat over the Street consensus of $26.50M/$0.23 and our $26.53M/$0.23. Revenues were driven by the NP-5 ramp. By customer, sales to Cisco (35% of revenue) were up 11% sequentially; ZTE (8% of revenues) increased 258% Q/Q. EZCH now includes Juniper is its ‘Other Customers’ category, which accounted for 57% of revenues and grew 24% Q/Q."

"EZCH guided revenues and non-GAAP gross margins to $28M/75%, at mid-point, vs. the Street consensus of $28.3M/74.2% and our $29.4M/74.2%. The Company guided FY15 OPEX down $3M from its prior $55M guidance based on updated Tilera assumptions."

For an analyst ratings summary and ratings history on EZchip Semiconductor click here. For more ratings news on EZchip Semiconductor click here.

Shares of EZchip Semiconductor closed at $15.72 yesterday.

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