Globes, Tel Aviv, Israel, Shlomi Cohen column
Dec 11, 2012 (Globes - McClatchy-Tribune Information Services via COMTEX) --
As the end of the year draws near, many companies are holding their annual analysts' days. Last week, it was Cisco (CSCO) on Friday, and Broadcom (BRCM) on Thursday. These analysts' days have something to tell us about the potential for 2013 of two Israeli semiconductor companies, EZchip Semiconductor Ltd. (Nasdaq: EZCH; TASE:EZCH), and Ceva Inc. (Nasdaq:CEVA); LSE:CVA), two more that I recommend for the new year.
John Chambers has been CEO of Cisco since the last century. He has seen days of strong growth, and days of great bubbles immediately followed by very deep lows. At present, he is leading his last great strategic change as CEO before he retires. He says that it will take place over two to four years.
The change, in three words, is "to be IBM", meaning less and less hardware, and much more software and services, or, in finer words, to be the number one IT company.
Cisco has a huge customer base all over the world that uses various systems from the company with an aggregate value of $180 billion. Now, the company wants to leverage that power, and to lead in the new era of cloud computing, Big Data, unified communications, mobility, video, security, software-defined networking (SDN), and so forth.
Chambers spoke a great deal at the analysts' day about the company's strength in designing application-specific integrated circuits (ASIC) for itself, which gives it a large advantage in costs, performance, and time to market.
On the face of it, talk of these capabilities ought to worry semiconductor producer EZchip. But anyone familiar with the relationship between EZchip and Cisco knows that Cisco sees EZchip's network processors (NPU) as processors designed especially for it. That is to say, as far as Cisco is concerned, these are also in-house developed ASIC processors. EZchip's processors are the brain that currently drives three important Cisco routing systems, and in the future there will be many more.
In early September, EZchip unveiled the new family of processors developed in Kiryat Gat, the NPS, and I have no doubt that in the development of these products too, Cisco is involved as a potential customer. On the basis of the NPS, within a few years, Cisco, and other companies, will build not only the advanced generation of routers that will deal with all layers of the network, but also highly advanced communications equipment for large storage centers.
In addition to that, the NPS processors are designed from the start for work environments of what are called software-defined networks. This is the biggest buzz today in networks, and it will be practical perhaps only in another two to three years. Analysts have been bothering Chambers about this at every opportunity, in case Cisco does not have appropriate software solutions, and its hardware will become irrelevant. Chambers always reminds them of the company's capability in developing ASIC processors.
Ceva's year of return to growth
Broadcom is an important customer for Ceva's DSP solutions. To judge from what Broadcom revealed in the area of mobile processors at its analysts' day, there is a high chance that 2013 will be a year of return to growth for Ceva. This will happen not only because of the momentum at Broadcom, but also because Ceva's large Chinese customer, Spreadtrum (SPRD) will at some point next year sell more third generation than second generation processors, and the royalties that Ceva receives on 3G processors are much higher.
Broadcom revealed that, next year, it will start to sell LTE processors, manufactured on 28 nano production lines. These are advanced processors that only Qualcomm has at present. Qualcomm is not a Ceva customer, since it has DSP solutions of its own.
Broadcom will enter the LTE market a year behind Qualcomm, but, according to its management, its processors will be smaller, and will have features that Qualcomm's processors don't have, and that, among other things, are to be found on the new iPhones and iPads.
Besides a first stream of royalties from LTE processors, Ceva will shortly benefit from Broadcom's new success with 3G processors. At its analysts' day, the company revealed that, in the next few months, Samsung is due to launch a new series of inexpensive smartphones on the basis of Broadcom 3G processors. Samsung itself is also a direct customer of Ceva, among other things because of certain Galaxy 3 models that have in them Ceva solutions integrated with Samsung's own processors.
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