Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



A Semiconductor Stock You Should Hold On To

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Cavium (Nasdaq: CAVM  ) looks like a good long-term proposition. Despite some short-term headwinds, I remain upbeat about the company's prospects.

Turning the tables
In its fourth-quarter report, Cavium noted that its Enterprise and Service Networks business experienced softness due to macroeconomic uncertainties. In addition, the company's major customer, Cisco (Nasdaq: CSCO  ) , was restructuring its business, resulting in lower orders. But now, it seems that both these factors are turning in Cavium's favor.

With Cisco's restructuring in place, I expect Cavium will see orders flow in. Moreover, Cavium already has contract wins worth $600 million in the pipeline, and this gives me some hope for a quicker turnaround. Analysts at J.P. Morgan project that the company's revenue will grow 20% annually in the long run. That's reassuring!

Innovations make a difference
What really adds to Cavium's credentials are its innovation and product development moves. The company spent almost 40% more on research and development than last year, and has come out with a cutting-edge product. Its latest OCTEON III processor, powered by MIPS Technologies' MIPS64(R) architecture, promises enhanced performance at lower cost and can be applied across a variety of areas, such as cloud computing, infrastructure equipment, and routers, among others. This chip will probably help Cavium gain more customers and spin more revenue in the future.

The company's capability to innovate has also helped it gain some momentum in its wireless display business. Acer's newly released WiView monitors will be powered by Cavium processors. In addition, the company is collaborating with Qualcomm (Nasdaq: QCOM  ) subsidiary Qualcomm Atheros to develop wireless TV adapters. These moves will probably provide more thrust to the top line, and also take some stress off its Enterprise segment.

The Foolish takeaway
Cavium missed the Street's revenue expectations in the just-concluded quarter by a whisker, but it did beat the Street on earnings per share. However, with the industry showing signs of revival and a strong pipeline to complement this, I believe the company can get its top line back in acceleration mode.

It would make sense to hold on to Cavium and reap the benefits when it gets going. In case you still doubt the company's potential, you may add Cavium to your Watchlist and track its progress.

Cavium is just one cog in the ever-changing wheel of technology. There's also a huge revolution in the mobile industry. To better prepare investors for this new revolution, The Motley Fool has just released a free report on mobile called "The Next Trillion Dollar Revolution" that details a "hidden" component play inside mobile phones that also is a market leader in the exploding Chinese market. Inside the report we not only describe why the mobile revolution will dwarf any other technology revolution seen before it, but we also name the company at the forefront of the trend. Hundreds of thousands have requested access to previous reports, but you can be among the first to access this just-released report by clicking here -- it's free.

Fool contributor Harsh Chauhan owns none of the stocks mentioned in the article. The Motley Fool owns shares of Qualcomm and Cisco Systems. Motley Fool newsletter services have recommended buying shares of Cisco Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (9)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1783181, ~/Articles/ArticleHandler.aspx, 10/21/2016 2:55:47 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,154.65 -7.70 -0.04%
S&P 500 2,141.70 0.36 0.02%
NASD 5,255.53 13.69 0.26%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 2:40 PM
CAVM $55.81 Down +0.00 +0.00%
Cavium Networks CAPS Rating: *
CSCO $30.18 Up +0.02 +0.07%
Cisco Systems CAPS Rating: ****
QCOM $68.09 Up +0.75 +1.11%
Qualcomm CAPS Rating: ****