It was the best of times; it was the worst of times. In this Dickensian tale, the good times are rolling for meganetworking experts in the enterprise sector while the poor and lonely belong in the consumer segment.
On Wednesday, hyperspeed network chip designer EZchip Semiconductor
The company counts Cisco Systems
After a tough July as EZchip's customers presented a parade of bad news, the stock has recovered and might start looking at fresh all-time highs again. At Thursday's opening bell, those record levels were just an 11% jump away.
By contrast, home networking specialist Entropic
The maker of MoCA networking chips that let devices use your coaxial TV cables for high-quality networking purposes saw its share rise more than 300% in a single year before peaking. Since that fateful day in January, the drop back down has been just as steep as the upward climb.
Entropic's $61.5 million in revenue was a fair bit less than management guidance, mainly due to big-time customer Verizon
CEO Patrick Henry claims to like the MoCA market share he's grabbing, mostly from chief rival Broadcom
So Entropic is doing objectively better on the consumer side than EZchip and its business-class products. But Entropic shares trade for about 2.3 times sales and 8 times EBITDA while EZchip commands 14 times sales and 35 times EBITDA.
Are investors reading too much into one company missing an arbitrary target while another hits it? Perhaps. But if management insists on playing the guidance game, they should also be able to back up their own projections.
Follow this dynamic chip duo from the comfort of your desk chair. Just click here to add Entropic to your Foolish watchlist, or here to keep an eye on EZchip.
Fool contributor Anders Bylund holds no position in any of the companies discussed here. The Fool owns shares of and has created a bull call spread position on Cisco Systems. Motley Fool newsletter services have recommended buying shares of Cisco Systems. Motley Fool newsletter services have recommended shorting Juniper Networks.
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