Everyone is suddenly enamored of chips again. Zacks Investment Research is the latest to return to semiconductors. It recommends Intel (Nasdaq:INTC), as well two “Israeli” companies, which I think are exceptional in their fields: Zoran Corporation (Nasdaq: ZRAN) and Marvell Technology Group (Nasdaq: MRVL). Zacks’ recommendations came out before Zoran published unexpectedly good financials yesterday.
Zoran supplies processors and digital solutions for entertainment and imaging applications. Zacks says it has seen recent movement in investment from IT infrastructure to consumer products. Zoran said in the preceding quarter that it was benefiting from positive developments in television and digital cameras. Zoran president and CEO Levy Gerzberg said the same thing at the time, adding the DVD sector, where Zoran is particularly strong, was also developing nicely.
Zacks apparently agrees with Gerzberg, and recommends Zoran. The company’s results yesterday show that Zacks took a calculated risk. Zoran, by the way, is a share that suffers from Wall Street schizophrenia. Anyone who looks at the company’s share graph for the past three years will understand why. Zoran rises and falls like a yo-yo, and not just because it disappointed or favorably surprised its investors and analysts. As far as Wall Street is concerned, Zoran, rather like Check Point Software Technologies Ltd. (Nasdaq:CHKP), is punished and rewarded on the basis of what analysts think is happening, in its case in the digital entertainment and DVD sectors. How many times has Zoran fallen because its competitor ESS Technology Inc. (Nasdaq:ESST) has failed?
Marvell is a completely different story from either Check Point or Zoran. Marvell is adored by Wall Street as much as it is admired by Main Street, which is the ideal condition for a public company. Marvell is considered a world leader in the field of solutions for all broadband and data storage solutions. Zacks believes that its capabilities are outstanding, especially during a boom time in the company’s areas of business, and with its surge in sales and profits.
Marvell, which will publish its second quarter results in mid-August, shows almost continuous sales and profit growth. Its secret, as I understand it from Main Street sources, is that in addition to high-quality products, its marketing operation is one of the most aggressive in the industry. Marvell is known for initiating solutions for regular and other customers. People who work with the company say it has a “well-oiled and efficient sales machine.” In short, Marvell’s managers know their jobs.
As far as I am concerned, Marvell has to fall a bit before one invests in it. I’m already sounding like a broken record on Marvell, because it never sells itself cheap (even relatively speaking). This is not only because of its commercial success, but because of Wall Street’s attitude toward the company, as I mentioned. Marvell’s management, like that of other companies that have learned to play this important game, maintains regular and direct contact with Wall Street, which it handles with the same care as it handles its relations with Main Street, winning premiums on both.
Published by Globes [online], Israel business news - www.globes.co.il - on July 27, 2005