EZchip Names Cisco, Juniper
The two router companies' names came out in the opening minutes of EZchip's earnings call yesterday, as CEO Eli Fruchter began listing some of the company's recent accomplishments.
Still, stock in LanOptics Ltd. (Nasdaq: EZCH), EZchip's parent company, was down 85 cents (5.6%) at $14.35 midday. It's probable that investors already factored the Cisco and Juniper wins into the price, considering it's been well known EZchip had worked with both companies.
Word of EZchip's win with Juniper was spreading in January 2006, although neither company has said exactly which products are using EZchip's processors. Likely candidates would be the IQ2 set of cards for Juniper's M- and T-series routers, and the MX960 Ethernet box launched last year. (See Juniper Makes Its Ethernet Move and Juniper Antes Up on Ethernet (Finally).)
Formerly an equipment supplier, LanOptics is now a holding company whose only holding happens to be EZchip. EZchip's earnings have therefore been visible for years but haven't been particularly exciting, charting at less than $5 million per quarter.
For its second quarter, which ended June 30, LanOptics reported losses of $1.6 million, 10 cents per share, on revenues of $4.6 million, compared with losses of $1.1 million, 7 cents, on revenues of $3.9 million the previous quarter.
For its second quarter a year ago, LanOptics/EZchip reported losses of $2.3 million, 20 cents per share, on revenues of $1.6 million.
Did LanOptics beat analysts' estimates? Hard to say; the company is so small, neither First Call nor Thomson Reuters is tracking it. George Gilder knows about the company, anyway. (See That Gilder Touch.)
Juniper represented 40 percent of revenues for the first half of 2007, and that figure could grow as the company launches more systems based on EZchip processors, Fruchter said on yesterday's earnings call.
That makes Juniper EZchip's growth vehicle, even as Cisco begins to ramp. "We believe that based on the progress that is being made that Cisco will start production sometime in 2008," Fruchter said.
Fruchter said EZchip also has wins with Ciena Corp. (NYSE: CIEN), Ericsson AB (Nasdaq: ERIC), Huawei Technologies Co. Ltd. , Nokia Networks , Nortel Networks Ltd. , Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA), and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763).
All told, EZchip has 115 design wins, and 37 of those systems are shipping in production, Fruchter said.
It would all add up to a nice start, except that EZchip started eight years ago, part of a network processor gold rush that targeted the masses of telecom equipment startups forming around 1999. As those companies died out, so did the network processor startups. (See Cogni-Gone?)
That leaves EZchip and its metro/core competitors, such as Bay Microsystems Inc. and Xelerated Inc. , in the position of relying on a handful of major customers. (Wintegra Inc. chases the access market, giving it a wider base of potential business.)
Aside from Cisco and Juniper, there's also Alcatel-Lucent (NYSE: ALU). But Fruchter indicated that the transition from ASICs to off-the-shelf parts is slow for big companies. Alcatel just hasn't made the switch yet, he said.
EZchip is in the process of buying back its shares from its venture investors. Once that's done, the company will "go public" by merging with LanOptics, presumably putting an end to the LanOptics name.
— Craig Matsumoto, West Coast Editor, Light Reading