AUTH

[la-onda]

David, could you please check AUTH?
thanks in advance
http://www.3stocksonfire.org/trading/index.php?topic=10029.msg111616#msg111616

[David Randolph]

David, could you please check AUTH?
thanks in advance
http://www.3stocksonfire.org/trading/index.php?topic=10029.msg111616#msg111616

Yeah, sure la-onda, I've been reading all the information you provide on that thread and the stock looks interesting, it kind of reminds me of IMMR.

But as I look at the DAX futures down 400 points as I write I've just lost appetite for writing any new analysis today ... maybe tonight.

[David Randolph]

Hi La-onda, I have a lot of research here for AUTH (6 analysts are covering the stock), let me copy/past one of them for you:

Meetings with Management Reconfirm Positive Outlook

Conclusion: We had the opportunity to host institutional investor meetings with the CEO & CFO of Authentec, Scott Moody & Gary Larsen. The meetings were dominated by discussions pertaining to the company’s future strategies, competitive dynamics, and the adoption of fingerprint recognition technology in high volume applications. What we observed was a management team with a heightened level of confidence regarding its ability to gain share in 2008 and beyond as well as increased conviction of expanding attach rates for fingerprint
sensors in both PCs and wireless handsets markets. Over the course of many meetings we did not detect any apprehension on the part of management with respect to the company’s short-term business trends relative to its original March quarter guidance. We continue to believe that shares of AUTH are a great way for investors to play the adoption of fingerprint recognition into highvolume commercial products. We reiterate our Outperform rating.

Share Gains In the PC Vertical On the Horizon. Management expects measurable share gain in the PC end market in 2008. The company currently estimates that it enjoys slightly over 50% market share in the PC vertical and expects that this metric should rise to approximately 65% by year end. While management is unwilling to share specifics it believes it has already secured the design wins necessary to gain this share. We believe that the company may be positioned to gain such share in the IBM ThinkPad line as well through initial engagement with Dell. Historically, these have been strong holds of AuthenTec's largest competitor, UPEK.

Wireless Handset Interest Outside of Japan

We have viewed M-commerce and the wireless handset vertical as the potential killer app” for AuthenTec and its fingerprint recognition technology. At the time of the company’s IPO such demand was only visible in Japan. Since that time we have begun to see the early signs of M-commerce test marketing by large wireless service providers such as Verizon. Management confirmed that they are now interfacing (in varying degrees) with all major handset manufacturers regarding products that may be targeted in Europe and North America. Based upon these engagements management was adamant that they will enjoy material volume demand from the handset markets outside of Asia in 2009. Their conviction around this assertion was substantially higher than just six months ago when management characterized the market as one that they expected to develop at some time in the future.

New Product Launches Remain on Target.

With two new product launches in the works, we believe AUTH is well on its way toward achieving its goals to expand penetration with its existing customer base as well as winning new customers, particularly in the wireless vertical. AUTH's AES1711 product targeting the wireless handset market has already been designed in by key customers and is expected to begin shipping in volume in 4Q08 (Dec). The AES1711 achieves new levels for both cost and power savings. Similarly, AUTH's AES2810 product ("Bora") targeting the PC market has already been designed in by three accounts with volume production ramping in 3Q08 (Sept). The AES1711 is AuthenTec’s first product that performs the matching algorithms on-chip resulting
in higher security and hence higher value to customers.

Short-Term Business Trends Appear Solid.   

Management did not appear at all apprehensive with respect to the company’s realtime performance relative to its original March quarter guidance. We acknowledge that Authentic is smaller player in the semiconductor space with a very strong product cycle. However, we believe it’ important to note that this trend is consistent with our channel checks that we first highlighted in our in our industry piece on 2/29 entitled “Time To Buy – March Quarter Tracking Very Well.” In this piece we highlighted our finding that turns orders were improving and our view that the majority of companies in our coverage universe would likely close the March quarter in the upper half of original guidance. Our channel checks to-date, continue to support this belief.

Management Guidance:



(Now me: this guidance shows a sequential decline in revenue and EPS, so there isn't much incentive to buy before the April 28th earnings release)

Technically the stock wasn't able to close above the descending 50 days SMA and therefore remains bearish. There's the $8.65 support on the downside.

I generally like AUTH's story, good luck la-onda

[Rmagos]

Hi La-Onda, hope that the results will help...

AuthenTec to Announce First Quarter 2008 Financial Results

Business Editors/High-Tech Editors

MELBOURNE, Fla.--(BUSINESS WIRE)--April 8, 2008--AuthenTec (NASDAQ: AUTH), the
world's leading provider of fingerprint sensors and solutions, today announced
that it will report first quarter ended March 28, 2008 financial results on
Monday, April 28, 2008 after the market closes.

The Company will host a conference call for analysts and investors to discuss
its financial results at 5:00 p.m. Eastern Time (ET).

First Quarter 2008 Conference Call Information
DateMonday, April 28, 2008
Time

5:00 p.m. ET

[David Randolph]

I don't have much time to justify this buy, so let me be brief.

First of all, AUTH has a similar investment story as IMMR and I'm selling IMMR today as you can read in the respective thread.

«AuthenTec, Inc. (AUTH), a mixed-signal semiconductor company, provides fingerprint authentication sensors and solutions to the high-volume personal computer (PC), wireless device, and access control markets. It offers a range of fingerprint sensors that enable users to access and control multiple functions on an electronic device by touching or sliding their finger across the sensor. The company's fingerprint sensors utilize unique information in fingerprints to verify the identity of the individual, as well as the unique, individual fingers on the same person. Its sensors are used in various applications related to security, password replacement, financial transaction authentication, and personalization applications. The company's products are used in a range of PC products and related peripherals, including laptops, desktops, memory keys, hard drives, keyboards, mice, and other devices. Its products also integrate into various wireless devices, such as mobile phones, and personal digital assistants and personal navigation device, as well as access control devices comprising door locks, time and attendance devices, and remote wireless entry keys. AuthenTec primarily offers its products to original equipment manufacturers, original design manufacturers, and contract manufacturers. It sells its products through direct sales force, a network of independent sales representatives, and distributors. The company was founded in 1998 and is headquartered in Melbourne, Florida.»

AUTH reported results yesterday, which were above expectations, and also guided higher for the 2nd quarter. Over the conference call, management said that AUTH just scratched the surface of its market opportunity, shipping 13 million sensors in 2007, while the potential market is 1 billion.

The company currently has a 50% global market share, but that is expected to expand to 60%-65% by the end of 2008.

Just a quick comparison between AUTH and IMMR:

- AUTH's market cap is $326 M, IMMR's is $305 M;
- Revenue in the latest reported quarter was $9.9 M for IMMR and $15.5 M for AUTH;
- Revenue growth from the year ago level was 67% for AUTH and just 15% for IMMR;
- AUTH is expected to have 2009 revenue of $103.5 M and IMMR $55 M;
- AUTH is expected to have 2009 EPS of $0.42 ($0.19 in 2008), while IMMR is expected to have 2009 EPS of $0.33 ($0.03 in 2008).

I guess that an authentication firgerprint sensor is a more immediate and valuable need than touch feedback. The firgerprint sensor is both cool and a necessity in terms of security, while touch feedback is just cool.

AUTH didn't hold on to its highs yesterday, so maybe it will pullback to close the gap at $10.74, perhaps retesting the 50 days SMA support. Or else it will just continue heading higher, I'm not sure.

But I find AUTH an attractive long term pick and I want it on the Main Portfolio, instead of IMMR.

[la-onda]

 

AuthenTec shares jump after company swings to 1Q profit
Tuesday April 29, 2:52 pm ET
AuthenTec shares up after company swings to 1st-qtr profit, guides 2nd-qtr sales above Street

NEW YORK (AP) -- Shares of AuthenTec Inc. jumped in afternoon trading Tuesday after the fingerprint technology provider said it swung to a profit in the first quarter and guided its second-quarter revenue well above Wall Street's expectations.

The stock spiked $1.71, or 14.2 percent, to $13.77.

For the period ended March 28, AuthenTec posted profit of $188,000, or 1 cent per share, compared with a loss of $5.7 million, or $7.30 per share, in the year-ago period.

The number of outstanding diluted shares skyrocketed between the periods, climbing to 30.5 million from 774,000, when the company went public last June.

Excluding stock-based compensation expenses, AuthenTec posted profit of $587,000, or 2 cents per share.

The Melbourne, Fla., company's revenue jumped 67 percent to $15.5 million from $9.3 million.

Analysts polled by Thomson Financial expected, on average, earnings of 2 cents per share on revenue of $15.2 million. Analysts typically exclude one-time charges, including stock-based charges.

AuthenTec said new products for the PC and wireless markets helped boost revenue during the period.

"We continue to strategically invest in research and development while bringing innovative new products and technologies to market, which we believe are critical to our future growth and will drive additional opportunities," Chairman and Chief Executive F. Scott Moody said in a note to clients.


nice timing for adding to the main portfolio David 
For the second quarter, AuthenTec guided for a profit of 2 cents to 3 cents per share, excluding certain items, on revenue between $17.2 million and $17.8 million.

Analysts expect earnings of 2 cents per share on revenue of $15.5 million for the second quarter.

Cowen & Co. analyst John Barton said the guidance highlights AuthenTec's strong product line and contract wins, and kept an "Outperform" rating.

"We like AuthenTec's consistent execution in its early stages as a public company and expect continued momentum driven by accelerating demand trends for fingerprint recognition in high-volume commercial products," Barton said in a note to clients.

[David Randolph]

nice timing for adding to the main portfolio David

Indeed la-onda, nice 11.9% jump yesterday (not enough to put the Main in the green, though).

AUTH's volume yesterday, at 1.65 million shares, was the 2nd highest ever, only surpassed by the IPO day back in June 2007:



All analysts loved yesterday's results, especially the strong guidance for Q2 2008. A few new analysts came on board with buy recommendations and I've attached one of them below, if you want to download the report.

Now, and here's the difference to my IMMR losing pick, is in the details, which these guys know and most people don't:

«Decline in ASPs
Historically, the average selling prices (ASPs) of semiconductor products have decreased rapidly. This trend is forecasted to continue as competition and improvement in technology have led to significant downward pressure on price. A reduction in ASPs to one customer could potentially influence ASPs to all customers. The prices of fingerprint sensors have fallen from $50 five years ago to $3-$6 currently. Estimates expect further declines of 8-22% per year going forward.»

Of course, ASP's are declining, but compare the $3-$6 price per unit compared to IMMR's $0.05.

Both companies have similar market opportunities (I guess AUTH's is somewhat larger and more immediate, though), at say, 1 billion units per year. At current rates, 1 billion units would mean about $4.5 B in revenue for AUTH and just $50 M for IMMR. But, of course, probably ASP's will continue to trend down in sensors and IMMR's profit margin in its mobility unit is higher, but still ...

I don't know where AUTH is going (for now, it's heading north), but at least in this case I'm in possession of most material information (the same institutional investors have) and I really like the long term investment story. Not shooting in the dark, but shooting with clear sky. If the shot will be right or not only time will tell ...

I'll keep holding AUTH.

[David Randolph]

Hmm, I see that 33 people read yesterday's update for AUTH, but just 1 downloaded the full report (probably it was la-onda).

This tells me people aren't as interested in these fundamental analysis as I thought.

Well, anyway, for the record (and maybe la-onda will also download this one), I'll leave AUTH's conference call transcript.

[la-onda]

downloaded 
seems that most of the readers just enjoy your summarization.
please continue to post both (summarization & attachment)!

tia
Oliver

[terainvestment]

I did not found the link to download the financial analysis on AUTH,
Where was placed?

[David Randolph]

I did not found the link to download the financial analysis on AUTH,
Where was placed?

Check out the link just above the chart:

[terainvestment]

thanks David, I downloaded now and I am reading...great analysis.

ciao

[Houlahan]

Thank you terainvestment.....you make me feel "normal"....i was searching like you.....
I did not jump on this one. Congrats la-onda & David!

[David Randolph]

Thanks Houlahan

A few more words from analysts on AUTH:

[David Randolph]

AUTH issued the following press release on Tuesday:

• AuthenTec Wins Summary Judgment In Atmel Patent Litigation Lawsuit
Business Wire (Tue 9:07am)

Good news.

The following is what Cohen & Company had to say about this:

«Quick Take: Favorable Ruling In Atmel Case

This morning AuthenTec issued a press release stating that the U.S. District Court of Northern California ruled in favor of the company regarding the patent infringement lawsuit filed by Atmel in March 2006.

Specifically the court concluded that none of AuthenTec's products infringe on any of the patent claims as alleged by Atmel. The court also awarded AuthenTec certain costs related to the suit which was not disclosed. However, we would note that as of Dec 29th, 2006, $2.78M of legal expenses had been accrued to cover future legal costs associated with the case.

Although we believe this news will have little if any impact on shares in the short term, we believe this announcement is noteworthy to investors as it is a clear indication that AuthenTec has a viable legal strategy and is proven its ability to protect its patent portfolio.»

The long term investment story continues to be "13 million sensors shipped in 2007 of the 1 billion a year possible over the long term". I'll keep holding AUTH.