Knobias Clip Report (10-31-2007)

Submitted By Knobias ClipReport

PSEM: Reports Strong Earnings on Digital Video Server Demand

The Halloween session saw the Fed give those with stakes in the housing dilemma a treat, subsequently passing out tricks to those concerned about the dollar, oil prices, and inflation. The culmination was a textbook ‘fade the initial reaction and buy the bottom’ scenario that has played out in past Fed announcements.

But that scenario may not play out again if the Fed sticks to their recent comments regarding their bias.

"The Committee judges that, after this action, the upside risks to inflation roughly balance the downside risks to growth." But they repeated their intention, as stated in the September release, that they "will continue to assess the effects of financial and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth."

The Fed seems to realize now that the bailing out of the subprime fiasco will begin to weigh heavily on other consumers and businesses with higher oil, cheaper dollars, and increasing inflation.

Otherwise, earnings season was still in full swing and some companies saw large disappointments like Crocs and others saw earnings increase such as MasterCard (MA). In the small cap space, one name reported earnings that had many taking notice.

Pericom Semiconductor Corporation (PSEM) enables serial connectivity with the industry's most complete solutions for the computing, communications and consumer market segments. The Company’s analog, digital and mixed-signal integrated circuits, along with its SaRonix-eCERA frequency control products are essential in the timing, switching, bridging and conditioning of high-speed signals required by today's ever-increasing speed and bandwidth demanding applications. Their headquarters is in San Jose, Calif., with design centers and technical sales and support offices globally.

The Company reported net revenues for the first quarter of $38.5 million, a 24.8% from the $30.8 million reported in the comparable period last year.

Revenue increases were due to strong demand for some of their products which facilitate the use of video over the internet which has become a very large market in the past few quarters.

"We are very pleased with the sharp increase in our revenues and operating profit in Q1," said Alex, Hui, President and Chief Executive Officer in the Company’s press release. "The results were driven by strong demand for our products across the board, with particular strength in digital video, ultra mobility and PCI-Express servers/PCs applications. We have been convinced that these high growth areas would translate into long-term growth for our business and operating results. We believe our results in Q1 are indicative of the benefits that we will enjoy through focusing on these markets with our broad solutions for high-speed serial connectivity."

Following the earnings release, shares spiked to highs of $16.70 before closing up 27% at $14.98 on 2.43 million shares traded.

In any event, with the strength and continued demand for video over the internet, the Company’s products could see growth over the coming quarters. Investors would be wise to watch.



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