Xilinx Spikes On A Rumored AMD Bid

Maybe one of the surest signs that things are starting to get back to normal is the M&A cycle firing up again in the semiconductor space. It had been quiet for a while, but then there was the July bid from Analog (ADI) for Maxim (MXIM) and then September’s Nvidia (NVDA) bid for Arm Holdings. Now the Wall Street Journal reports that there may be another significant M&A deal in the works, with Advanced Micro Devices (AMD) reportedly in “advanced talks” to acquire Xilinx (XLNX) for something north of $30 billion.

I’ve liked Xilinx’s business for a while, and I see some significant growth opportunities for the company in areas like data center and 5G, with specific drivers like server acceleration, SmartNICs, antennae, and O-RAN. The immediate overlap with AMD is a little sketchy at first glance, and the businesses are very different (different product cycles, different customer bases, different development processes, et al), but Xilinx would definitely fit in with AMD’s desire to grow the data center business, and FPGA companies are scarce assets.

Read more here: 

Xilinx Spikes On A Rumored AMD Bid

Xilinx Still Has Growth Drivers, But The Street Has Gotten More Cautious

When I last wrote on Xilinx (XLNX), I didn’t see a particularly attractive opportunity in the shares, but I also didn’t expect the roughly 50% underperformance relative to the SOX index that was to come. Xilinx has made a credible case for attractive long-term growth opportunities in markets like data centers and from expanded product platform opportunities like Zynq, but the company has also seen a much faster-than-expected erosion of its 5G opportunity from ASIC vendors like Marvell Technology Group (MRVL).

The shares have already enjoyed a good bounce from their March panic lows and do still seem to have some upside relative to discounted cash flow, or at least more than has typically been available. Management needs to rebuild the enthusiasm that investors once had for FPGAs in general, and that is likely to take some time, but won’t be helped by the challenges created by the COVID-19 outbreak. Although I see some opportunity here, there are names I like better on a risk-adjusted basis.

Follow this link to the full article:
Xilinx Still Has Growth Drivers, But The Street Has Gotten More Cautious

Lattice's Investor Day Highlights The Separation From The Company's Past

To the extent that a bullish position on Lattice Semiconductor (LSCC) is controversial, at least beyond valuation arguments, it is controversial primarily because Lattice used to be a poorly-run, scattered, low-value-add chipmaker. I’ve written multiple articles on how Lattice has changed (new management, new plan, new priorities, et al), but the company made its own case recently with an Analyst Day that highlighted what’s new and different about Lattice today.

For those who’ve been following the story closely over the last year or so, this Analyst Day was more evolutionary than revolutionary, but management nevertheless provided some interesting detail, particularly with respect to content opportunities, a new design philosophy, and the near-to-medium-term financial model. It wasn’t a home run presentation (there was some disappointment on the operating margin target), but it was a positive in my view and this is still a stock that interests me at the right price.

Continue here:
Lattice's Investor Day Highlights The Separation From The Company's Past

Lattice Semiconductor Posts A Good Quarter, But The Bigger Story Is Still Building

When I last wrote about Lattice (LSCC) I said “clearly the word is out” on this company’s turnaround/restructuring plan, but the shares are up another 25% since then as investors continue to wake up to the significant opportunities for Lattice’s low-power FPGAs in emerging applications like 5G and edge AI inference. With FPGA competitors like Xilinx (XLNX) and Intel (INTC) focusing on much different products and markets, and product performance challenges with would-be competitors from the MCU space, I like the set-up for Lattice over the next three to five years.

What I don’t like is the price. Even factoring in a significant revenue and margin ramp, it is difficult to call today’s price a bargain. While there is room for Lattice to exceed even bullish expectations, and investors love semiconductor growth stories (as seen with IoT-driven Silicon Labs (SLAB) ), I’m not inclined to chase the shares at this point.

Read more here:
Lattice Semiconductor Posts A Good Quarter, But The Bigger Story Is Still Building

Lattice Semiconductor On The Run As Investors Start To Appreciate The New Opportunities

I’ve been pretty bullish on Lattice Semiconductor (LSCC) for a while now, as I’ve thought that this company has some really interesting opportunities in low-power FPGAs, and particularly given the strong management team the company has assembled. In addition to diversified growth opportunities across autos, industrial (machine vision, security, et al), communications, and data center, Lattice is an under-appreciated player in low-power AI inference, a high-potential market only just getting started.

Clearly the word is out on Lattice now, as the shares reacted very positively to first quarter guidance that was quite a bit better than what most chip companies have offered. While I’m worried about talking myself into a more bullish to support a higher fair value, I really do think there’s something here and that these are still the early innings of what could become an impressive differentiated chip growth story.

Read more here:
Lattice Semiconductor On The Run As Investors Start To Appreciate The New Opportunities

Xilinx Emerges As A Semiconductor Unicorn And Shivs The Shorts

Not too many semiconductor stocks have reported as of this writing, but with the Texas Instruments (TXN) and Intel (INTC) reports in, it looks like the market's fears of another round of downward guidance revisions for the first quarter are materializing. But then, there's Xilinx (XLNX) - quite possibly a true unicorn this quarter in not only reporting very strong growth (revenue up 34% yoy and 7% qoq) but also guiding UP for the next quarter.

With strong earnings and the 5G opportunity seeming to come through sooner than expected, Xilinx shares shot up almost 20% and set a new 52-week high. Xilinx has a legitimate, differentiated opportunity with its strong FPGA and FPGA/SoC portfolio, including near-term opportunities like 5G wireless and auto ADAS and longer-term opportunities like data center/AI and autonomous driving. Although I think Xilinx can generate double-digit long-term revenue growth and that today's DCF-based fair value isn't unreasonable, it's certainly not an overlooked opportunity at this point.

Read more here:
Xilinx Emerges As A Semiconductor Unicorn And Shivs The Shorts

Lattice Still Looks Like A Very Interesting Self-Improvement Story

Conditions have gotten ugly in the semiconductor space but not equally so for all players. Companies in the field-programmable gate array (or FPGA) space have held up better, as both Lattice (LSCC) and Xilinx (XLNX) are up about 15% over the past year, well ahead of the 12% decline in the SOX, and both are likewise well ahead of the SOX on a six-month comparison (where Xilinx has significantly outperformed Lattice). Although Lattice offered a very weak guide for the fourth quarter as distributors burn off inventory and Asian customers order less on macro uncertainties, much of that post-earnings drop has been recovered in recent weeks.

I really like the Lattice story. There is scarcity value in the FPGA space overall, and I think Lattice has a meaningful opportunity in focusing on "lower horsepower" FPGAs where Xilinx and Intel (INTC) really don't compete and where Microchip (MCHP) may well not be as focused as Microsemi was. I also believe there is a significant longer-term margin improvement opportunity here, and one that management seems to take quite seriously. The only "but" is valuation; Lattice does look a little undervalued and there is an opportunity for upgraded expectations over time, but it screens out as relatively fairly-valued in a space with a lot of cheaper-looking alternatives.

Read the full article here:
Lattice Still Looks Like A Very Interesting Self-Improvement Story

A Sell-Off On M&A Noise Is An Opportunity With Mellanox

Seeing the company lose around $400 million in market value upon the announcement of his hiring is probably not the beginning that new Mellanox (MLNX) CFO Doug Ahrens was looking for, but it’s also not all that unexpected, as the shares had been bid up in the hope that a buyout announcement would soon be coming. From my perspective, I certainly don’t think the hiring of a CFO precludes a deal, and I think Mellanox is worth owning deal or no deal – particularly now that the share price is back in the $80s.

Read more here:
A Sell-Off On M&A Noise Is An Opportunity With Mellanox

Increased Focus On Better Margins Driving More Value At Lattice Semiconductor

Lattice Semiconductor (LSCC) has been doing alright. Up about 20% since my last update and up close to 40% over the last year, Lattice has not only outperformed the SOX by a good margin but also a number of high-quality chip names like Silicon Labs (SLAB) and FPGA competitor Xilinx (XLNX). Some of this outperformance is due, I believe, to management simply stabilizing the business in the wake of the collapse of the Canyon Bridge deal, the deterioration of the Silicon Image business, and challenges in the mobile/consumer business. More recently, though, management has taken more definitive steps toward enhancing the margin profile of this business, and as margins are a prime (if not principal) driver of semiconductor stock valuation, this enhanced margin focus has upgraded the value proposition at Lattice.

Follow this link to continue:
Increased Focus On Better Margins Driving More Value At Lattice Semiconductor

Washed Out Expectations Should Help MaxLinear From Here

It tells you something about the level of confidence the market had in a company when it announces that the next quarter’s revenue will be 20% lower than expected (and 25% lower relative to expectations just a month or so before) and the stock basically shakes it off in a few hours. Such was the case with MaxLinear (MXL), a recent serial disappointer in the semiconductor space that has repeatedly lowered expectations in recent quarters, but where there’s still some measure of confidence that 2019 and 2020 will see a significant ramp in new advanced products.

As I’ve written in the past on MaxLinear, I expected 2018 to be a forgettable year (although not this bad), and I still see opportunities for the company to pick up business in MoCA, wireless backhaul, and DOCSIS 3.1 in 2019 and 2020, with hyperscale data center interconnects also chipping in late in 2019 and into 2020. I believe MaxLinear shares can support a low $20s fair value today, but a lot of management credibility is resting on this third quarter being the worst point of the cycle and revenue ramping up from there.

Follow this link for more:
Washed Out Expectations Should Help MaxLinear From Here

Lattice Semiconductor Looking To Go From Stabilization To Growth

It has been a rocky couple of years for Lattice Semiconductor (LSCC), including a failed attempt to sell the company to a Chinese entity, but the company has regrouped and management has stabilized the business. Now the question moves to whether or not the company’s focus on lower-cost, lower-power FPGAs for applications like robotics, security/surveillance, auto ADAS, and edge computing/networking can drive a re-acceleration to double-digit revenue growth and meaningful margin leverage.

I’m skeptical on Lattice’s prospects for attaining/maintaining double-digit revenue growth on any consistent or long-term basis, but I do believe the company’s low-power FPGA and millimeter wave technologies address real market needs and opportunities, and I believe the move to 28nm FD-SOI chip architecture can drive meaningful margin leverage. With the shares trading between my DCF and margin-based EV/revenue fair values, I believe there’s still upside here, but Lattice will need to start delivering some beat-and-raise quarters to drive truly exciting performance.

Read more here:
Lattice Semiconductor Looking To Go From Stabilization To Growth

Broadcom Not Exactly Back To Square One

The market hasn’t been too accommodating to Broadcom (NASDAQ:AVGO) of late. Once a darling (and still well-regarded by many analysts and investors), the shares have been underperforming on a host of issues including worries about the company’s M&A policies (and its reliance on M&A), competitor actions, and the overall health of the semiconductor space.

I really have no operational concerns about Broadcom, and I think the company’s well-balanced mix will generate above-average growth in both the short term and long term. The prospect for value-adding M&A is more uncertain, though returning cash to shareholders is not a bad back-up plan. Based on mid-to-high single-digit long-term growth potential and margins in the 40%’s, I believe Broadcom shares are meaningfully undervalued now, but it will likely take some time for the dust to settle and for investors to move past worries about limitations on future M&A.

Read the full article here:
Broadcom Not Exactly Back To Square One

Lattice Semiconductor Looking To Reach That Next Level

Lattice Semiconductor (LSCC) has some meaningful operational challenges left to overcome, not the least of which are pushing out ASIC/microcontroller companies for design wins and leveraging an operating expense structure that is bloated relative to the revenue base. The company is not without opportunity, though, as Lattice's low-cost lower-power FPGAs are winning slots across communications, computing, industrial, and auto end-markets, with future opportunities in so-called "edge" applications like machine vision, artificial intelligence, and AR/VR.

I think investors are right to remain skeptical about Lattice's standalone potential, particularly given that double-digit revenue growth has often been a difficult bar for the company to reach and that it is difficult to drive attractive operating leverage with a relatively small revenue base. Even so, the standalone potential still suggests some undervaluation, and I continue to believe that Lattice could draw a bid of $7 (or more) from a company that wants its FPGA and mmWave technologies.

Click here to continue:
Lattice Semiconductor Looking To Reach That Next Level

Lattice Semiconductor Has To Get Back To Business As Usual

After around a year of speculation and worry, Lattice Semiconductor (LSCC) finally got resolution on the $8.30/share Canyon Bridge takeout offer, as an executive order from President Trump blocked the deal on security grounds after a recommendation from the Committee on Foreign Investment in the United States. This decision wasn't exactly a surprise, as the company had multiple go-arounds with the Committee (including two re-filings), and the shares were down about a quarter year-to-date.

Lattice has a lot of work to do. Guidance and context have been lacking, as management elected not to host conference calls while the Canyon Bridge deal was pending, but revenue and gross margins have been choppy. On the other hand, the company's IP and capabilities in low-power programmable logic devices (including FPGA) and app-specific standard products have value, and the company's cost structure could offer meaningful (and attractive) synergies for the right acquirer.

Continue here:
Lattice Semiconductor Has To Get Back To Business As Usual

Microsemi Delivering On Its Execution Promises

In my opinion, Microsemi (MSCC) is doing a good job of laying to rest whatever lingering arguments there were from bears that this company is/was “just” a serial acquisition story. Since the large PMCS deal, Microsemi has been executing on its synergy/cost-cutting targets, and the company continues to march toward its long-standing 65/35 gross margin and operating margin goals. What's more, the company is doing a decent job on revenue as well, with new products and market share gains helping to solidify the bull case.

Microsemi shares haven't done very well since my last update (down about 7% and meaningfully underperforming SOX), but then, I did think the share price was demanding back in January and that buyout expectations were a big part of the story. While a buyout of Microsemi is still a possibility (and perhaps even likely depending on your time frame), the quarter-by-quarter execution story isn't going to be so exciting, and particularly so when the company isn't leveraged to buzzy areas of the chip sector today like autos and IoT. With the shares now offering a little upside relative to my fair value estimate, they could be worth a look and particularly so, if the market/shares were to sell off again.

Read more here:
Microsemi Delivering On Its Execution Promises

Seeking Alpha: Microsemi Executing Its Model To Good Effect

Going its own way seems to still be doing some good for Microsemi (NASDAQ:MSCC), as this consistently off-beat semiconductor company appears to be better-positioned than many of its rivals for the near term. With good leverage to relatively healthy commercial aerospace and defense end markets and modest exposure to weaker areas in industrial, PCs, or handsets, Microsemi should have a decent backdrop against which to continue driving long-promised margin improvements.

Although I don't personally value share buyback announcements all that highly, Microsemi has been improving its cash flow generation and continues to trade below what I believe to be its fair value. Given the stock's strong run of relative outperformance, though, the contrarian call may no longer be to prefer Microsemi, but rather to take another look at names like Qorvo (NASDAQ:QRVO), Atmel (NASDAQ:ATML), and Linear (NASDAQ:LLTC) that haven't done as well.

Continue here:
Microsemi Executing Its Model To Good Effect

Seeking Alpha: Microsemi Offers A Buy-The-Dip, But Wireless Is A Concern

The market certainly didn't like what it saw and heard from Microsemi's (NASDAQ:MSCC) fiscal second quarter results, as seen in the nearly 10% selloff on Friday. While weakness in the wireless sector is a concern and Microsemi's valuation wasn't exactly undemanding, I think this may be shaping up as a buy-the-dip opportunity for investors looking for good below-the-radar GARP stories in semiconductors.

Microsemi is looking to make significant content inroads in commercial aerospace and satellites, while continuing to benefit from a strong position in defense and a growing presence in FPGA. Add in the potential to leverage its timing expertise into the auto and industrial automation verticals, and there is worthwhile long-term potential here. I've changed little in my model after this quarter, and my fair value remains in the mid-$30's.

Read the full article here:
Microsemi Offers A Buy-The-Dip, But Wireless Is A Concern

Seeking Alpha: Is The Latest Stumble An Opportunity At Altera?

Altera (NASDAQ:ALTR) shares have gone nowhere fast. After a run that saw the shares double from May of 2010 to May of 2011, the shares have spent most of the following four years chopping around between $30 and $40. It hasn't really gone all that much better for Altera's chief rival, Xilinx (NASDAQ:XLNX), either - the shares haven't shown the same choppiness, but the five-year returns are almost identical.

I liked the shares around $34 back in June of 2014 and they did reach $38 before disappointing guidance and growing concerns about the health of the telecom/wireless business sent them back below the $35 midline. While I do think the shares are undervalued today, investors need to appreciate that the competitive dance with Xilinx is unlikely to ever result in a clear winner and that new entrants into the market could eventually chip away at market share and margins. I still like Altera relative to a lot of the analog players, but the stock likely needs the company to post strong margins in the second half of 2015 and no further pushouts of the 14nm plans to break out above the high $30's.

Read more here:
Is The Latest Stumble An Opportunity At Altera?

Seeking Alpha: Despite Some Challenging Markets, Microsemi Continues To Move Forward

This is starting to shape up as a disappointing quarter for semiconductor companies (Maxim (NASDAQ:MXIM), Linear (NASDAQ:LLTC), and Skyworks (NASDAQ:SWKS) not withstanding), so I suppose that ought to temper some of the disappointment with Microsemi's (NASDAQ:MSCC) in-line December quarter and soft guidance for the next quarter. On a more positive note, management is starting to see restructuring/cost reduction efforts pay off in margin leverage and the company's book-to-bill remains above 1.0x.

I continue to believe that Microsemi remains overlooked and undervalued. The company is looking to farm its legacy discrete business for margins and cash flow, while driving growth from newer businesses like timing and FPGA where the company's addressable markets and market share appear to be growing. I continue to believe that fair value on Microsemi shares lies above $30 and that they remain a good buy within the chip space.

The full article can be read here:
Despite Some Challenging Markets, Microsemi Continues To Move Forward

Seeking Alpha: Microsemi Chugging Along

Microsemi (NASDAQ:MSCC) has always been a different sort of semiconductor company. In an industry where investors pay a lot of attention to leading-edge technologies, Microsemi has historically been better known for less advanced high-reliability products that are often sole-sourced. Where many semiconductor companies are tied heavily to end markets like communications, industrials and consumer products, Microsemi has long been more leveraged to defense and aerospace.

The end result of all of this is that Microsemi shares often seem to zig when others zag. But with the defense, aerospace, and space markets looking stronger into 2015 and the company still building up its underrated FPGA business, Microsemi seems to me to be getting stronger at a time when many investors are worried about the semi space. As I continue to see fair value in the low-to-mid $30's, I continue to believe this is a stock well worth investors' due diligence efforts.

Read more here:
Microsemi Chugging Along