Published On: Tue, May 20th, 2014

Israel’s EZchip Semiconductor’s Fortunes Rise On Increased Sales To Cisco

Israeli chip manufacturer EZchip is a significant provider of computer chips to companies around the world.

EZchip logo - jpg

Last week, EZchip Semiconductor Ltd‘s shares soared 12% when it posted record revenues in the year’s first quarter. Increased sales to Cisco Systems was credited with a 37% rise in sales. EZchip produces the chips that are used to power Cisco’s high selling ASR 9000 router which the company has called its most successful router in a decade.

In the quarter ending April 26, sales of Cisco’s ASR 9000 rose 59%.

For now, EZchip has no need to worry about Cisco changing to in house chip production. Analysts see EZchip’s stock hitting $32 a share. Its stock is up 2.7% this year, after falling 26% in 2013, its worst performance since 2005. This in spite of the fact that Cisco’s rival, Juniper Networks, has already reduced its orders from EZchip as it is developing its own chip making division.

Today four out of nine stock analysts give EZchip a buy rating, while the other five, including Barclay’s, recommend holding its shares.

In a conference call, EZchip CEO Eli Fruchter said, “We continue to feel very comfortable with Cisco and expect our revenues from Cisco to grow significantly year over year in 2014.”

Cisco is expected by EZchip to count for 40% of its total sales for 2014.

EZchip reported first quarter earnings of 33 cents per share. This beat expectations of only 32 cents per share in a survey by Bloomberg.

An estimated one third of all of EZchip’s revenue in the previous quarter was credited to sales to Cisco. The company is also providing high end routers to internet companies such as Comcast And Vodaphone Group which processes video streaming.

EZchip plans to introduce a new more powerful line of network processors called NP-5 later this year. It expects that Cisco and other customers like the Chinese ZTE Corporation will be happy with it.

Co founded in 1999 by Eli Fruchter and Alex Tal, EZchip Semiconductor is a fabless semiconductor company that develops and markets Ethernet network processors. Headquartered in Yokneam, Israel, its shares are traded on the NASDAQ and Tel Aviv Stock Exchanges. Until 2008, EZchip operated as a subsidiary of LANOptics. Its shares are currently trading at more than $25.

Eli Fruchter has been EZchip’s president and chief executive officer since it was founded in 1999. He has was the chairman of its board of directors from December 2006 to December 2007. Mr. Fruchter, 58, was also a founder of Adacom technologies LTD, a manufacturer of data communications products. He has a B.S.c in electrical engineering from the Technion in Haifa. Fruchter is also a veteran of the Israel Defense Forces’ vaunted 8200 high tech unit, which has produced many Israeli high tech entrepreneurs.

The company’s other co founder, Alex Tal, served as its first chief technology officer and vice president of research and development. He left the company in 2008.

Tal is currently with Toga Networks, A technology company specializing in providing advanced technologies and solutions to leading global telecommunication equipment manufacturers founded in 2009.

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