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Apple Suppliers Broadcom, Qualcomm Could Battle For Xilinx: Analyst

Apple ( AAPL ) suppliers Broadcom ( AVGO ) and Qualcomm ( QCOM ) were pitted Tuesday in a theoretical battle to acquire Xilinx ( XLNX ) which, late Wednesday, is expected to report flat fiscal fourth-quarter sales along with down earnings. Xilinx stock was up 1.3% to 46.38 on the stock market today . It split the difference between gains by fellow takeover candidates Cavium ( CAVM ) and Marvell Technology Group ( MRVL ), up 3.4% and 0.75%, respectively. MKM analyst Ian Ing lists the trio among small- and medium-size fabless firms subject to acquisition as semiconductor companies scramble to serve the top 20 customers: Apple, Samsung, Cisco Systems ( CSCO ), Nokia ( NOK ), Ericsson ( ERIC ) and China’s Huawei, among others. “Customers prefer the fewest suppliers while preserving multi-sourcing choice,” Ing wrote in a research report. “Fabless companies can improve their operating models with more scale in manufacturing and operations.” Field-programmable gate array (FPGA) makers are proving attractive targets. In December, Intel ( INTC ) completed its acquisition of Altera, an FPGA-maker. For Broadcom, the technology would round out its networking and communications equipment needs. Qualcomm needs to diversify from its core mobile business which is threatened by chipsets and disagreements with licensees in China, Ing wrote. Ing expects Xilinx to tack on $3 earnings per share to 2017 run rates, “should a large acquirer apply scale benefits.” He rates Xilinx stock a neutral and has a 46 price target, noting it’s coming off a 2015 data center and communications trough. For Q4, which ended in December, Xilinx is expected to report flat sales of $566.2 million and adjusted earnings per share of 52 cents, down 10% year over year. For fiscal 2016, the consensus of 21 analysts models $2.2 billion and $2.03, down a respective 7% and 16.5%.

Goldman Sachs Calls 5G Winners: Verizon, Cisco, Intel, Broadcom

Verizon Communications ( VZ ) and AT&T ( T ) could shake up the U.S. residential broadband market by 2020 by deploying 5G wireless services to homes, challenging cable TV firms Comcast ( CMCSA ) and Charter Communications ( CHTR ), says Goldman Sachs. While 5G is expected to provide much faster data speeds, another market opportunity for AT&T, Verizon and T-Mobile US ( TMUS ) will be applications that require always-on, low-data-rate connections, says Goldman Sachs in a new research report. The apps involve data-gathering from industrial sensors, home appliances and other devices often referred to as part of the Internet of Things. Simona Jankowski, a Goldman Sachs analyst, says that some chipmakers, network gear suppliers and software companies will see an upside in 5G deployment. Jankowski says that Broadcom ( AVGO ), Qualcomm ( QCOM ), Intel ( INTC ), Cisco Systems ( CSCO ), cell tower operator Crown Castle ( CCI ), and bandwidth service provider Zayo Group Holdings ( ZAYO ) could see upside from 5G deployment. “We expect pre-standard 5G commercial deployments to begin in the U.S. in 2017, when AT&T and Verizon plan to be first in the world to roll out fixed wireless 5G broadband to the home, followed by pre-standard 5G mobile networks in Korea in time for the 2018 Olympics,” wrote Jankowski in the report. U.S. regulators are focused on opening up high-frequency airwaves , also called millimeter wave spectrum, for 5G services. “Europe led the 3G transition, with industry giants such as Ericsson ( ERIC ) and Nokia ( NOK ) leading the way,” said Jankowski. “With 4G, the baton passed to the U.S., driven by a new group of industry leaders such as Qualcomm and Apple ( AAPL ). With China, Korea and Japan targeting 5G rollouts on par with or ahead of their Western counterparts, it bears watching whether the wireless industry’s center of gravity shifts once again (to Asia).” The Goldman Sachs analyst says that 5G also could have upside for Cisco, Intel, Zayo and Crown Castle. “We view Cisco’s market leading position in IoT as a strategic differentiator, given that 5G will likely be closely coupled with IoT,”  Jankowski added. “We expect Intel’s server and networking business to benefit from increased data traffic and greater demand for compute-intensive data analytics. “As the largest operator of small cell networks in the U.S. and one of the largest pure-play providers of dark fiber in large metros respectively, Crown Castle and Zayo look well positioned for this long-term investment cycle.”

Chinese ZTE Sanctions Over Iran Sales Could Hurt Apple Chipmakers

A new U.S. export ban against Chinese mobile gear maker ZTE related to its under-the-table sales to Iran could hurt  Apple ( AAPL ) chip suppliers Qualcomm ( QCOM ), Qorvo ( QRVO ) and Skyworks Solutions ( SWKS ), a Pacific Crest analyst wrote Wednesday. Regulators imposed the sanctions Tuesday, alleging that ZTE used four shell companies in China and Iran to “illicitly re-export controlled items to Iran in violation of U.S. export control laws.” The ban prohibits U.S. companies from selling to ZTE. Chinese foreign minister Wang Yi opposed the sanctions, saying that ZTE’s tech purchases support thousands of U.S. jobs, according to the AP. Chipmakers Cavium ( CAVM ), Integrated Device Technology ( IDTI ), Silicon Laboratories ( SLAB ) and Xilinx ( XLNX ) also sell to ZTE. “This approach will only hurt others without necessarily benefiting oneself,” Yi said at a new conference Tuesday. ZTE isn’t banned from selling products in the U.S. but cannot procure components from U.S. companies. U.S. firms can apply for an export license, but Pacific Crest analyst John Vinh sees the government unlikely to grant them. The development could shuffle the smartphone market. ZTE owns about 4% of the global smartphone market, Vinh wrote. Industry tracker IDC says that ZTE competes alongside Xiaomi and Huawei in the low-end to midrange smartphone market, vs. No. 1 smartphone vendor Samsung. Vinh expects short-term effects on chipmakers to be “negligible.” Longer term, he says that ZTE could lose share to Huawei, Ericsson ( ERIC ), Alcatel-Lucent ( ALU ), Nokia ( NOK ), Siemens ( SIEGY ), Xiaomi, Oppo and Lenovo. “Alternatively, ZTE could conform to the U.S. embargo list, which could result in sanctions being lifted,” he wrote. Xilinx is most at risk, with 3%-3.5% of total revenue stemming from sales to ZTE, Vinh estimates. Silicon Labs follows with 2%-2.5% of total revenue wrapped in ZTE sales. IDT, Qualcomm and Qorvo are each 2% tied to ZTE, Cavium 1%-2%, and about 1.5% of Skyworks’ sales stem from the Chinese smartphone maker. Wall Street largely yawned Wednesday, however. Midday on the stock market today , only Qualcomm stock was down, dipping a fraction. Cavium stock was up a fraction. Shares of Qorvo, Silicon Labs, Skyworks and Xilinx were all up more than 1%. Integrated Device Technology stock was up more than 2.5%.