VTSS OUTLOOK (MORE)
Updated from 10:07 a.m. EST
Kicking off the first quarter of fiscal 2004, chipmaker Vitesse (VTSS:Nasdaq - commentary - research) managed to break even on a pro forma basis a quarter ahead of expectations. It also guided above consensus estimates for sales and earnings in the quarter now under way.
Investors were pleased, sending Vitesse shares up 57 cents, or 7.3%, to $8.39 in the first 30 minutes of Friday's session.
In a research note, Wedbush Morgan analyst David Wu called Vitesse "our favorite stock in the wide area network communications IC group because it has much better operating leverage than its larger peer PMC-Sierra at a fraction of the valuation, and a more balanced business model than Applied Micro Circuits at the same valuation." (Wu has hold ratings on PMC-Sierra and Applied Micro Circuits.)
For calendar year 2005, Vitesse trades at 24 times earnings, compared to 52 times and 58 times for Applied Micro and PMC-Sierra, respectively, according to Wu. On a ratio of enterprise value to projected revenue for 2005, Vitesse changes hands at 4.6 times, Applied Micro at 4.8 times, and PMC-Sierra at 8.8 times, he noted.
Wu has a buy rating on the stock; Wedbush Morgan hasn't done investment banking for Vitesse.
The Camarillo, Calif.-based company, which makes silicon used in computer storage and communications, posted sales of $50.3 million, up from $35.7 million for the same quarter last year. Wall Street had penciled in estimates for sales of $48.1 million.
