PLX Technology Getting a Little of the Equinix Treatment

By David Gross

One of the key metrics in data center investing right now is the expectations multiple, or how much a stock rises or falls based on unexpected guidance revisions.   Equinix, Mellanox, and Riverbed have all experienced this over the last few months.   Now it's PLX Technology's (NASDAQ:PLXT) turn.

PLX Technology is a leading manufacturer of PCI Express silicon, and recently entered the 10 Gigabit Ethernet silicon market by acquiring 10GBASE-T chip manufacturer Teranetics.   The company guided next quarter's revenue down from an expected $32.5 million to a range of $28 million - $31 million.   A 9% drop in the midpoint has resulted in the shares being knocked down 15% after hours.   Revenues for the past quarter also came in slightly under expectations, although they were up 40% year-over-year to $30.2 million. 

With its market cap now down to $133 million, and with $43 million in the bank, PLXT has an enterprise value of $90 million, or .75x annualized revenue.    GAAP earnings for the quarter were $1.1 million, or 3 cents a share, while non-GAAP earnings were $2.7 million, or 7 cents a share.    So at the after hours price of $3.60, its trading at 13x annualized non-GAAP EPS, or about 9x annualized non-GAAP EPS net of cash.

In addition to a very reasonable valuation, the company is poised to benefit from the release of PCI Express 3.0 (aka Gen 3) late this year, which will lead to a wave of new product introductions in mid-to-late 2011.    And growth beyond the next six months looks promising with many SSD manufacturers looking to use PCIe 3.0, as are 40 Gigabit Ethernet line card manufacturers and InfiniBand suppliers.  Additionally, if PLXT is not selling the 10GBASE-T chips it acquired from Teranetics, Mellanox is not selling its 10GBASE-T LOM product, because PLXT supplies Mellanox with the PHY for that product. 

With the expectations multiple trumping earnings multiples with data center equities right now, this stock is now on sale due to yet another Wall Street overreaction to a single digit percentage, top line guidance revision.

10GBASE-T to Enable 10G Data Center Networks

By Lisa Huff

It’s now been more than eight years since the “original” 10G Ethernet standard (IEEE 802.3ae-2002) was released, yet we just passed the milestone of 1 million ports shipped last year. And, the market has really started to grow in 2010 with that many ports shipped just in the second quarter. The majority of these devices have been deployed into data centers around the world. Most of them have been SFP+-based until just recently. So what suddenly spurred the market on?

Just like its predecessor, Gigabit Ethernet, the 10G market will grow faster now that 10GBASE-T is a reality. Some of you may say, well, 10GBASE-T has been available for a few years now – not really. While most of us refrain from admitting it most of the time, in the Ethernet market, nothing really takes hold until Cisco (CSCO) has adopted it, and lo and behold, Cisco just recently released its first switch blades with 10GBASE-T ports. While I’m sure Cisco would like to take most of the credit, I have to point to the chip manufacturers here for diligently working to reduce the chip power consumption below the threshold of 5W per port so they can be used in high-density switches. Aquantia, Broadcom (BRCM), Teranetics (now part of PLX Technologies (PLX)) and SolarFlare have all now produced chips using their 40nm processes that have power consumption numbers at 3-4W/port. In fact, some even advertise numbers lower than this, but I would recommend caution in counting on these decreased specs, since they are probably based on something less than 100m-reach.

All of the above mentioned companies are also working on lowering the power consumption even more by developing 28nm processes. But, for the time-being, the 3-4W/port seem to be enough for all the top switch manufactures.

PLX Technologies Acquires Teranetics for $36 Million

PLX Technologies (PLXT), a leading supplier of PCI Express silicon, is acquiring privately-held 10GBASE-T chip designer Teranetics for $36 million. While this move solidifies PLXT's presence as a data center networking chip supplier, it is not a great exit for Teranetics' investors. The company has raised $61 million since 2003, and along with Solarflare and Aquantia, makes up the leading triumvirate of 10GBASE-T chip suppliers. While 10GBASE-T power consumption per port has dropped as low as 3 watts as production has shifted to smaller process geometries, the technology is still advancing at a slow pace in the data center.

Teranetics key customers include Mellanox (MLNX), to whom it supplies the PHY for that vendor's 10GBASE-T LOM product. PLXT reported revenues of $30 million last quarter and has a market cap of $139 million.