MIPS Tech CEO Confident In Gaining Traction In Mobile Market
29 October 2010 - 7:02AM
Dow Jones News
MIPS Technologies Inc. (MIPS) has seen its revenue--and stock
price--soar as it benefits from increasing demand for its chip
designs, and its chief executive is confident that trend will
continue as the company gains traction in the mobile market.
MIPS, which licenses its processor designs to semiconductor
companies to make chips for everything from digital televisions to
networking products, has benefited from rising demand for
electronic devices that connect to the Internet. The company late
Monday reported a 50% increase in first-quarter revenue to $22.5
million, sending shares up 33% Tuesday.
The stock has more than tripled this year since Sandeep Vij
joined the company as president and chief executive.
MIPS is the market leader in providing processor blueprints for
chips to be used for digital-home electronics, such as blu-ray
players, cable set-top boxes and digital TVs. Broadcom Corp.
(BRCM), which earlier this week posted record third-quarter results
and bullish fourth-quarter estimates, is MIPS's biggest customer,
contributing about 15% of the company's revenue in the first
quarter.
MIPs CEO Vij said the growing complexity of electronic
devices--including the ability to connect to the Internet--has been
benefiting the company.
"The devices you buy today, you look for more functionality than
you did in the past," Vij told Dow Jones Newswires. He added that
more complexity means the software load on the processor is
greater, resulting in demand for more powerful, multicore
processors.
"It's a good trend for us because licensing fees are higher on
more advanced, more capable, higher performance processors," Vij
said. "Typically our royalty rates are higher there too."
And MIPS is looking toward the mobile space as a future growth
driver. While no mobile devices currently run on MIPS-based chips,
Vij said MIPS has signed about seven processor contracts for
mobile, including a recently announced partnership with Paris-based
4G chip maker Sequans Communications. He expects MIPS-based
smartphones to be on the market in the first half of 2011.
While mobile presents a potential high-growth area for MIPS, the
company was late to the market and has to compete against
entrenched chip designer ARM Holdings PLC (ARMH), the U.K. company
whose microchip blueprints are in nearly all phones and tablets,
including Apple Inc.'s (AAPL) iPhone and iPad.
And MIPS processors aren't compatible with mobile operating
systems like Nokia Corp.'s (NOK) Symbian, one factor that kept it
out of the market.
Vij said recent shifts in the market--including to new operating
systems like Google Inc.'s (GOOG) Android and to the
next-generation mobile broadband network known as Long-Term
Evolution, or 4G--could help MIPS gain traction in mobile.
The company moved quickly to be compatible with Android, and Vij
said MIPS's strong position in supplying WiFi for networking will
help it gain customers looking for baseband chip designs, which
process wireless signals coming from base-station towers.
"4G protocols are actually more similar to WiFi than they are to
3G," he said.
He added that MIPS-based chips are as power efficient as those
designed by ARM--an important factor for mobile devices. And the
company has touted the multithreading capability of MIPS-based
chips, which allows a processor core to handle multiple tasks at
once.
While it won't be easy to go head-to-head with ARM in mobile,
analysts said there's nowhere for MIPS to go but up.
"Sometimes just being a 'me too' when somebody has 100% market
share is enough to win some business," Benchmark analyst Gary
Mobley said.
-By Shara Tibken, Dow Jones Newswires; 212-416-2189;
shara.tibken@dowjones.com
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