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MIPS on the rise

Posted: 03 Nov 2010 ?? ?Print Version ?Bookmark and Share

Keywords:processor? IP core? vendor?

MIPS Technologies has a lot going for it these days. The company's revenue for the quarter ended Sept. 30, 2010, increased by 50 percent to $22.5 million. This is above the Wall Street-high estimate and more than $2 million above the high end of management's guidance.

MIPS' stock price rose 23.6 percent to $13.16 on the day after the company's financial results announcement, making MIPS the third largest percentage gainer on Nasdaq on that day.

MIPS' leaders went to New York on Oct. 28 to ring the Nasdaq stock market opening bell. In the afternoon of the same day, Sandeep Vij, CEO, MIPS appeared on the Mad Money TV show on CNBC hosted by Jim Cramer.

Vij invited his executive team, their spouses, and some children, to the opening bell ceremony at Nasdaq.

In a sharp contrast to a year ago, the Wall Street loves MIPS. Share holders love them. Even the media seems to be in love.

By the Wall Street standards, however, MIPS is not a big company. After all, the processor core IP vendor has only 150 employees. CNBC, before deciding on having MIPS on its "Mad Money" show, reportedly wondered if the company is worth Cramer's interview.

Now, questions everyone should ask are: Does MIPS have everything it needs? Is MIPS over-rated?

Vij hopes to convince the world: "It's true that we are not a big company; but it doesn't mean that we can't be a great company." To achieve that greatness, what will a company need? "Companies need to have a soul," said Vij.

This reporter was caught off guard, because one rarely hears a CEO reflecting out loud on the depth of "soul" in a corporation.

But before looking into the soul of MIPS, let's examine MIPS' business today.

Business grade
After MIPS' great Q1 results, some are already feeling that the company is over-rated. Gary Mobley, senior analyst, Benchmark, issued a note downgrading MIPS from buy to hold.

Mobley noted that his firm started coverage of MIPS with a Buy rating on February 12, 2010. He said, "Eight months ago, shares seemed to discount an earnings per share stream much less than our forecast. This was, perhaps, a function of previous disappointments MIPS would typically deliver." He went on: "Today, in our opinion, shares are discounting an EPS stream much higher than published consensus and management's guidance. This leaves little room for error, and accordingly, we feel the risk/reward for the shares is less favorable."


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