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26 October 2009
Americas/United States
Equity Research
Semiconductor Devices
Entropic Communications Inc.
(ENTR)
FORECAST INCREASE
C3Q Earnings
■ Bottom Line. ENTR posted SeptQ results/DecQ guidance above
expectations on MoCA deployments at new service providers offsetting VZ
weakness, satellite biz strength, and silicon tuner/broadband access traction.
Despite near-term growth drivers, impending competitive pressure from
BRCM’s 2H10 MoCA entry lead us to maintain our Neutral rating on shares.
■ SeptQ Results/DecQ Guidance Above. SeptQ revs of $31.0m (+18.4%
q/q) beat CS/cons at $29.5m/$29.6m (+13% q/q) and guidance of $29-$30m
(+11-15% q/q), on non-VZ MoCA strength, satellite products, and silicon
tuner and broadband access traction, offsetting VZ softness. 51.9% GMs
beat our est of 51.0%; EPS (ex-opts) of $0.02 beat CS/cons of $0.01. DecQ
rev guidance of $34-$35m (+10%-13% q/q) beat CS/cons of $32.0m/$32.5m
(+8.5%/+10.0% q/q), on MoCA deployments at new SPs, new CSS
penetration, and BTS improvements. GMs were guided to ~52.5% (+60bps
q/q) on mix and EPS (ex-opts) to $0.04 above prior CS/cons at $0.02.
■ Near-Term Drivers Encouraging. ENTR expects solid Q4 growth (+11.4%
q/q) despite VZ softness (Q3 net data/TV adds of 198K & 191K announced
this morning fell -35% & -36% q/q), reflecting expectations for rapid
diversification to new SPs – TWC and Cox. Further into 2010, mgmt expects
DirecTV/Comcast, and 2nd tier SP traction. ENTR also expects VZ to return
to a run-rate of ~250K ne