This one has already been solved several times over at the forum, but I thought I’d write it up here for those of you who don’t like to keep up with all those discussions.
The latest teaser for this company comes in from Andrew Mickey at Breakaway Investor — though it appears that various other Taipan letters have been pushing this one for at least several months. Maybe that’s why Breakaway Investor is having a fire sale at the moment, just $49 for a year — I assume it’s cheaper to rehash stale ideas than to come up with your own new ones.
But, being stale doesn’t mean it’s no good for us. So … what are we dealing with here?
Mickey talks about this as the next cell phone, next computer and next cable TV in terms of the potential long term growth. They’re predicting that a billion cell phones will ship with this technology, and that this company will continue to dominate the niche.
The big deal is a version of GPS technology (initially a defense dept. innovation) for cell phones — and since we all know that there are more than a billion cell phones sold every year now, that’s obviously a huge market.
He notes that the use of cell towers (instead of just satellites) will enable the real expansion of GPS, since he says GPS is now limited by the small number of transponders on the satellites (96,000, according to him — I have no idea whether or not this is true, there are obviously many more GPS-enabled devices than that in the world already).
He also compares this technology to the camera phone — which many people, including me, thought was an idiotic idea.
They dominate this narrow niche, and they supply nearly all the handset manufacturers.
So … what clues were provided for this GPS in cell phones/using cell towers company?
It’s a semiconductor firm, pretty clearly — they make the chipsets for this technology.
They went … “From $15 Million in Revenue to a Stunning $247 Million in Just Six Years”
“With a 60% market share that’s growing 50 -100% a year, you know that management has wisely targeted the right fields. Can you think of any faster-growing markets in the world than these fields?”
And the final clue — some specific data about patents:
“Thinking way ahead, this remarkable company is wisely protected by a small Army of patents. Specifically, as of December 31, 2006, it had 193 patents granted worldwide with 152 patents granted in the U nited S tates and 41 in foreign countries.”
Well, I can’t take credit for sleuthing this one out, but several folks in the forum have gone through all the clues and concluded that this company is definitely ..
Sirf Technologies (SIRF)
And it’s pretty clear that they’re right. It’s less clear that this is a winner, of course.
This is an interesting company, and it is certainly the right part of the trend for GPS-related stocks (I’ve seen others teased and recommended a lot lately, including Garmin). But do keep in mind that Taipan folks have been recommending this one since it was up in the high 20s earlier this year (at least), and it’s at just about $21 right now.
And while they do have a strong market share in the chips for this version of location technology for cell phones and similar devices, they are far from being the only company in the market. Broadcom, for one, has a similar product, and I’m sure Texas Instruments and the other biggies do as well, or are working on similar products. As one poster on the forum, mgpf, noted, the barriers to entry might not be as significant as Mickey implies.
So … will they keep the lead in market share for what I do agree is going to be a big market? That’s a pretty big question. If you’ve got the answer, let us know — there are a bunch of analysts on this one, and they’re guessing at a forward PE of 16, so if it is going to grow as touted that’s not bad at all. If it’s not going to grow like that, the trailing PE in the 70s looks a lot less impressive.
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