Friday, July 29, 2005

Mips!...What happened?

Ok people, Mips suffers another 20% fall after earnings. Not quite the same drop seen after last Q earnings but still a significant drop.
Total earnings were flat and inline although royalties were higher by 9% and contract revenue was down 6% than last Q4 2004.

So what was i expecting? I was expecting signifcantly higher revenue due to the increased revenue from PSP and PS2 sales. PSP hardware sales numbered 2.04 million sales for the last quarter according to Sony.
I was thinking royalty fees of about 5 dollars per PSP. I think i was way off. That would mean a total of 10 million dollars but royalty revenue came in at about 7 million.

So I am not sure how the royalties pricing works. They may charge per device or may charge per x amount of devices or per company per quarter or something else.
I obviously don't know. If some one shed some light, let me know.

So what do I think about MIPS going forward. I think they are currently fairly priced at approx 7 dollars. I do expect them to continue to grow. They grew revenues by 30% this year. I expect this is accelerate slightly with increased lciensing deals and the fact they are providing products in emerging markets. I think MIPS is a long term hold of 4 quarters. I think the 12 month price target is about 9 dollars if they continue to grow at 30% year over year on an annual basis.

Competitors:
Conexant - CNXT, develop semi conductor chips for networking gear

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