Will EZchip Momentum Be Reflected in LanOptics' Share Price?

As telecommunications guru George Gilder says, the growth in video, including video-sharing websites such as You Tube, which Google announced it was acquiring yesterday, needs to be transported over networks, and for that you need strong engines - high speed network processors. This is the field of expertise of LanOptics (Nasdaq: LNOP) subsidiary EZchip Technologies. Last Friday, EZchip president and CEO Eli Fruchter made a presentation at the Gilder/Forbes Telecosm 2006 conference, and anyone interested in reading the main points of the presentation can view them on the company’s website.

Overall, it’s clear that this could be a tremendous opportunity for EZchip, but it also carries all the risks that any start-up has to contend with. What’s more, investors have been waiting for a breakthrough for some years and so far, this has not been forthcoming. It will be interesting to see what the company’s third quarter financial report will reveal. EZchip is set to announce that commercial deliveries of its second generation processor have already begun. Last Friday’s presentation named a number of giant companies as ‘target customers’ and the more optimistic among investors believe that customers of the likes of Cisco, Juniper Networks (Nasdaq: JNPR), Alcatel (NYSE: ALA), and others are already in the bag.

In addition to naming a number of telecommunications equipment companies as potential partners, the presentation also referred to the telecommunications card market as a by-product of the metro Ethernet router and switch market, and which has already been targeted by big chip manufacturers such as Broadcom Corp. (Nasdaq: BRCM) and Marvell Technology Group (Nasdaq: MRVL). According to EZchip’s presentation, a single Ethernet chassis can potentially host 10-12 line cards with between one to four network processors each, thus EZchip could win substantial business from Marvell, since Broadcom has already acquired a company in this field.

EZchip and Marvell Technology Israel, which are next door to each other in Yokneam, are known to be working in close collaboration, probably opposite potential customers for both companies such as Cisco and Juniper. Perhaps this will come in the form of the supply of applications by both EZchip and Marvell, based on EZchip’s future generations of processors in 2007 and 2008. All that now remains is to watch and see whether the new momentum in LanOptics’ stock, in the wake of its subsidiary's presentation at last Friday’s conference, will last longer than just a few days.

LNOP 1-yr Chart

Published originally by Globes [online], Israel business news - www.globes.co.il © Copyright of Globes Publisher Itonut (1983) Ltd. 2006. Republished on Seeking Alpha with full permission.

Comment on this article