NEW YORK – MIPS Technologies these days seems to have everything going for it.
The company’s first quarter revenue -- announced last Monday (Oct. 25th) -- was up by 50 percent to $22.5 million, well above the Wall Street-high estimate and more than $2 million above the high end of management’s guidance.
MIPS’ stock price rose 23.6 percent to $13.16 on the day after the company’s financial results announcement, making MIPS the third largest percentage gainer on Nasdaq on that day.
MIPS’ leaders visited New York last Thursday (Oct. 28th) to ring the Nasdaq stock market opening bell, which the company couldn’t have timed better. That afternoon, Sandeep Vij, MIPS CEO, appeared on Jim Cramer’s “Mad Money” on CNBC on that day.
MIPS CEO Sandeep Vij invited his executive team and each executive’s spouse (and their kids in some cases) to the opening bell ceremony at Nasdaq last week.
In a sharp contrast to a year ago, the Wall Street loves MIPS. Share holders love them. Even the media seems to be in love.
By the Wall Street standard, MIPS, a processor core IP vendor with 150 employees, however, is not a big company. CNBC, before deciding on having MIPS on its “Mad Money” show, reportedly wondered if the company is worth Cramer’s interview.
Now, questions everyone should ask are: Does MIPS have everything it needs? Is MIPS over-rated?
Vij hopes to convince the world: “It’s true that we are not a big company; but it doesn’t mean that we can’t be a great company.” To achieve that greatness, what will a company need? “Companies need to have a soul,” said Vij.
This reporter was caught off guard, because one rarely hears a CEO reflecting out loud on the depth of “soul” in a corporation.
But before looking into the soul of MIPS, let’s examine MIPS’ state of business today.
Is MIPS over-rated?
After MIPS’ great first quarter results, some are already feeling that the company is over-rated. Benchmark’s senior analyst Gary Mobley, just today (Nov. 1st), issued a new note, in which he downgraded MIPS from buy to hold.
Mobley noted that his firm started coverage of MIPS with a Buy rating on February 12, 2010. He said, “Eight months ago, shares seemed to discount an earnings per share (EPS) stream much less than our forecast. This was, perhaps, a function of previous disappointments MIPS would typically deliver.” He went on: “Today, in our opinion, shares are discounting an EPS stream much higher than published consensus and management's guidance. This leaves little room for error, and accordingly, we feel the risk/reward for the shares is less favorable.”
As Mobley himself recognizes, his rating downgrade could prove premature, though.
In the first quarter results (ended Sept. 30th, 2010), MIPS’ revenue upside was balanced between license and royalty revenue. The company’s revenue from royalties was $13.6 million, an increase of 40 percent from the first quarter a year ago. License revenue was $8.9 million, an increase of 71 percent from the $5.2 million reported in the first quarter a year ago.
MIPS has kept its word by chipping away at the mobile market -- against all odds. A year ago, the notion of “MIPS in mobile” seemed like a long shot, because ARM has dominated the cell phone market.