x
Optical components

Light Peak Puffs Up Enablence

Enablence Technologies Inc. (Toronto: ENA) shares have climbed 65 percent in two days, but some investors might be overestimating the Intel Corp. (Nasdaq: INTC) win that apparently spurred this outburst.

Enablence reported on Wednesday that its photodiodes have been chosen for use in Intel's Light Peak modules -- the 10-Gbit/s optical interconnect for PCs. Light Peak is intended to be a universal replacement for USB, Firewire, and other interconnects.

Here's the interesting part. Analyst Daniel Kim of Paradigm Capital Inc. , one of the firms that underwrote Enablence's IPO, wrote in a report issued today that Enablence's "contribution to Light Peak will amount to approximately $10-12 per PC."

Enablence's shares had already risen about 26 percent the day after the Intel announcement. But today, possibly on the strength of Kim's report, Enablence climbed another 18 cents (55 percent) to 51 cents per share. That's a 96 percent gain in two days.

But is $10 to $12 per PC realistic? Light Reading ran that figure past some experts and got the phone equivalent of a funny look.

"I don't know about anything double digits" inside a Light Peak module, says Richard Doherty, an analyst with The Envisioneering Group and a longtime follower of Intel. "These speeds don't require one-photon sensitivity photodiodes, or the kind of x-ray photodiodes NASA uses."

One source familiar with optical components pricing puts photodetectors, even 10-Gbit/s ones, at between 50 cents and $1. "And if you're going to see volume, the price is going to come down."

Neither source thinks Intel needs a high-end photodetector for Light Peak. Moreover, if it's a commodity photodetector that Enablence is providing, then the company is likely to face long-term competition from bigger, higher-volume competitors.

Intel wouldn't comment when asked about the likely price of a Light Peak module, but given that it's meant for PCs, it can't be very high. Or, to put it another way: If Enablence's piece alone is going to cost Intel $10, that bodes ill for the total cost of Light Peak.

"I think their goal was to be in the low tens of dollars and to have that drop over time. USB 1.0 started in the low tens of dollars," Doherty says.

Even 50 cents per PC could be a good haul for Enablence. Kim estimates 112 million desktop PCs will get sold in 2010 -- based on the 337 million total PCs that Gartner expects will ship. But not every PC is built with Intel inside (blasphemy, we know) and it's probable that not every PC will have Light Peak. Moreover, Light Peak, which hasn't begun shipping, won't reach real volumes until 2011.

Given all the question marks, Kim's report doesn't give a specific estimate for how much the Intel deal is worth to Enablence. He didn't change his forecast, which calls for Enablence to see revenues of $45.2 million this year, $64.9 million in 2010, and $104 million in 2011.

Enablence officials and Kim couldn't immediately be reached for comment.

— Craig Matsumoto, West Coast Editor, Light Reading

<<   <   Page 2 / 4   >   >>
danp5648 12/5/2012 | 3:51:17 PM
re: Light Peak Puffs Up Enablence

First its NOT a "nice win" they "E" have won THREE times SO FAR with TUTOR. The last win includes not just ONT's but the whole WORKS, not just the low end crap. I blame lightreading for this for the poor reporting.&nbsp;


Yes they have TO turn a profit and turn the corner. Yes yes yes boring point however.&nbsp; That issue has been done to death and will be fixed this quarter.


Calix is doing great after the Q-to-Q fall but still geographically challenged and no Intel possible help.





danp5648 12/5/2012 | 3:51:15 PM
re: Light Peak Puffs Up Enablence

Yes they have TO turn a profit. You missed the word "TO" you moron.


Polder 12/5/2012 | 3:51:15 PM
re: Light Peak Puffs Up Enablence Danp, you should share whatever you are smoking. Turned a profit? They started the quarter with $11.5M in the bank. They raised about $13M and some change during the quarter. They ended the quarter with $14.9M in the bank and admit a current burn rate of just under $7M per quarter. The rest of this post is copied straight from their quarterly statement. Enlighten me as to where the profit is shown...

In FQ1 2010, the Company continued the process of strengthening its financial capabilities by
reducing costs and strengthening its cash resources. As part of this process, it successfully
completed on May 12, 2009 raising $13.8 million in a common share offering.
Our operations continue to show improvement. This quarter, relative to the previous quarter,
has shown a reduction in our net loss from $12.8 million in the previous quarter to $6.9 million
this quarter. The full impact of the reductions initiated in the previous and current quarters are
still to be fully realized. Nonetheless, this quarter has already shown a reduction in absolute
dollars in all of the key cost categories: sales and marketing, R&D and G&A. This trend will
likely continue in subsequent quarter as a result of additional actions taken to reduce R&D and
G&A expenditures.
The gross margin picture has shown slight improvement mainly due to the actions taken on our
Components side where the margins have shown substantial improvements. The overall gross
margin still requires further improvement and measures taken to consolidate contract
manufacturing activities in the current and following quarter will help in this direction, although
the full impact of it will not show until the third and fourth quarters due to lead times on contract
manufacturing and existing contractual obligations.
Had the sales picture improved in the current quarter, the operating loss would have been much
smaller. It is the CompanyG侵s expectation that the deliveries which are scheduled for the second
fiscal quarter will show improvements in the overall revenue picture G囚 assuming all other
conditions remain the same.

NET LOSS
The net loss for FQ1 2010 was $6,883, as compared to $12,808 for FQ4 2009. Of the $12,808
net loss for FQ4 2009, $3,300 relates to an increase in the provision for future tax liability
related to intangible assets. After adjusting for this provision, the net loss for FQ4 2009 was
$9,508, which was $2,625 more than the net loss for FQ1 2010. The decrease in net loss is
attributable to the reasons set out above.
Polder 12/5/2012 | 3:51:14 PM
re: Light Peak Puffs Up Enablence You might have addressed the issue but has ENA? If I were in Vegas, I would not bet on a company that had to make this statement.

The Company expects that its current level of cash and cash equivalents will be sufficient to
meet its operations and capital expenditures for more than the next 12 months, based on its
2010 operating forecasts. These forecasts include assumptions regarding:
G求 revenue growth as the global economic conditions improve and the economic stimulus
packages in the U.S. and elsewhere are accessed by the CompanyG侵s customer base;
G求 the increase in design contracts on behalf of key optical component customers;
G求 improved gross margins as a result of the consolidation of our contract manufacturing
are completed and the improvements to the cost elements of our optical components
and subsystems;
G求 the changes we have made to our R&D costs arising from the shift of some of our noncore
engineering initiatives to lower cost centers; and
G求 improvements in accounts receivable collections and inventory management.
However, if economic conditions deteriorate, thus preventing the Company from achieving its
operating objectives or if the current financial crisis results in financial institutions requiring the
Company to provide additional cash collateral in support of its credit facilities or if its lenders
seek early repayment of the CompanyG侵s obligations due to failure to maintain current ratio and
tangible net worth covenants, the Company may not have sufficient cash and cash equivalents
to meet its operations and capital expenditures for the next 12 months. Enablence may receive
nominal cash proceeds on the issue of additional common shares on the exercise of options
and warrants depending in part on the market price for its shares. The Company periodically
evaluates the opportunity to raise additional funds through either the public or private placement
of equity capital to strengthen its financial position and facilitate possible investments and to
provide sufficient cash reserves to protect itself from the effects of the current unpredictable
economic conditions.
danp5648 12/5/2012 | 3:51:14 PM
re: Light Peak Puffs Up Enablence

And I told you they have that problem locked down. I addressed this issue now move on.&nbsp;

Polder 12/5/2012 | 3:51:14 PM
re: Light Peak Puffs Up Enablence You miss my point, Einstein. Look at their burn rate, look at the money they just raised. Do the math. Before they become profitable, they need to come up with a plan to stay open over the next three quarters. There is a limit to the number of times they can raise money externally and their balance sheet does not merit a significant line of credit from anyone. Gross margins of 21-24% lag well behind Calix/Adtran. The T7 platform is a great technology but ENA does not have the legs or credibility to make it on its own. The current businss model is unsustainable.
Polder 12/5/2012 | 3:51:13 PM
re: Light Peak Puffs Up Enablence Good Lord Danp5648, back away from the Kooliad and put down the pipe. Chhatbars's first statment is sophmoric at best, moronic in the whole. If investors truly beleived in his business acumen, they would be investing now to take advantage of the anticipated upswing in the stock price in April. The reason people are not investing in ENA is due to the cash flow issues and the lack of visibility of profit by April. While they continue to reduce cap ex and stem some of the bleeding, I highly doubt that he is going to be able to reduce the current burn rate sufficently to become profitable. BTW, how are all the Verizon sales you touted last December working out for ENA?
danp5648 12/5/2012 | 3:51:13 PM
re: Light Peak Puffs Up Enablence

"Chhatbar said he believes many investors are waiting for Enablence to turn cash-flow-positive before buying the stock. He said the company expects to reach that milestone by April."


Shut up and wait for April.&nbsp;


"He said the company spent heavily on R&amp;D as it readied products for commercial launch. Now that its products are available, R&amp;D spending will decline to a more typical 15-20% of revenue instead of 30-35%, he said."


&nbsp;


from the WSJ

Polder 12/5/2012 | 3:51:13 PM
re: Light Peak Puffs Up Enablence This is not your standard boiler plate statement of a healthy company. However, if economic conditions deteriorate, thus preventing the Company from achieving its operating objectives or if the current financial crisis results in financial institutions requiring the Company to provide additional cash collateral in support of its credit facilities or if its lenders seek early repayment of the CompanyG侵s obligations due to failure to maintain current ratio and tangible net worth covenants, the Company may not have sufficient cash and cash equivalents to meet its operations and capital expenditures for the next 12 months.
danp5648 12/5/2012 | 3:51:13 PM
re: Light Peak Puffs Up Enablence

Yes, that's who I am talking about you moron.

<<   <   Page 2 / 4   >   >>
HOME
Sign In
SEARCH
CLOSE
MORE
CLOSE