GSI Technology Inc. (NASDAQ: GSIT)

GSI Technology Inc. (GSIT) develops and markets static random access memory (SRAM) products that are incorporated primarily in networking and telecommunications equipment, such as routers, switches, wide area network infrastructure equipment, wireless base stations and network access equipment. In addition, the Company serves the needs of the military, industrial, test equipment and medical markets for SRAMs. The Company offers more than 30 basic product configurations of its SRAMs based on their basic product type and their storage densities. These basic product configurations are the basis for more than 9,500 individual products that incorporate a variety of performance specifications and optional features. The Company’s products can be found in a range of networking and telecommunications equipment, including multi-service access routers, universal gateways, enterprise edge routers, service provider edge routers, optical edge routers and gigabit Ethernet switches.

The Company was formerly known as GSI Technology and changed its name to GSI Technology Inc. in June 2004. GSI Technology Inc. was founded in 1995 and is headquartered in Santa Clara, California.

Source: Reuters.com, SEC Filings.

Financial Summary

GSIT reported its 24th consecutive quarter of profitability with net income of $2.4 million, or $0.09 per diluted share, on net revenues of $14.7 million in its second fiscal quarter ended September 30, 2009. In the second quarter of fiscal 2009, the Company earned $3.6 million, or $0.12 per diluted share, on net revenues of $17.1 million.

For the six months ended September 30, 2009, the Company reported net income of $4.6 million, or $0.17 per diluted share, on net revenues of $28.9 million compared to net income of $6.6 million, or $0.23 per diluted share, on net revenues of $34.4 million in the first six months of fiscal 2009.

Sequentially, second-quarter fiscal 2010 net revenues increased by $468,000, or 3.3%, from $14.2 million in the first quarter; net income increased by $325,000, or 15.3%, from $2.1 million in the prior quarter. According to Lee-Lean Shu, chairman and CEO, second-quarter revenues were slightly better than expected, due primarily to the Company’s August 2009 acquisition of substantially all the assets related to Sony Electronics’ SRAM product line.

Gross margin and operating margin were 44.4% and 10.3%, respectively, in the second quarter of fiscal 2010 compared to 42.5% and 16.8%, respectively, in the prior quarter. In the second quarter of fiscal 2009, gross margin and operating margin were 45.7% and 24.0%, respectively.

Lower operating margin reflects a sequential increase of $1.1 million, or 70.9% in research and development expense related in large part to the tape-out of a new 65-nanometer product that accounted for $650,000 in R&D expense in the second quarter. Selling, general and administrative expenses increased sequentially $213,000, or 10.3%, primarily reflecting professional fees related to the acquisition of the Sony Electronics SRAM product line. Selling, general and administrative expenses were $2.3 million, or 15.5% of net revenues, in the second quarter, compared to $2.1 million, or 14.5% of net revenues, in the prior quarter, and $2.4 million, or 13.9% of net revenues, in the second quarter of fiscal 2009.

Second-quarter direct and indirect sales to Cisco Systems were $4.8 million, or 32.6% of net revenues, compared to $3.3 million, or 23.1% of net revenues, in the prior quarter and $4.2 million, or 24.8% of net revenues in the second quarter of fiscal 2009. Sales to Huawei Technologies were $1.7 million, or 11.7% of net revenues, compared to $1.3 million, or 9.3% of net revenues, in the prior quarter and $1.2 million, or 6.8% of net revenues in the second quarter of fiscal 2009. Military/defense sales were $2.3 million, or 14.8% of net revenues, compared to $2.4 Million, or 15.8% of net revenues, in the prior quarter.

Source: Reuters.com, SEC Filings.

Analyst Consensus

This is the consensus forecast among 2 polled investment analysts. Against the GSI Technology Inc. company.

The 2 analysts offering 12 month price targets for GSIT have a median target of 4.50, with a high estimate of 5.00 and a low estimate of 4.00. The median estimate represents a -3.68% decrease from the last price of 4.67.

Source: www.ft.com

Source: http://www.reuters.com/finance/stocks/estimates?symbol=GSIT.W

Investment Highlights

The Company received the first silicon on two new 65-nanometer products in the second quarter, which it believes will help it maintain its leadership position in the SRAM market. The second new product, the Company’s third generation SigmaQuad has already been designed into the next generation service router of one of the Company’s largest customers. The SigmaQuad line of products continues to grow, accounting for 17.1% of total shipments in the second quarter compared to 15.9% in the prior quarter, 19.8% in the fourth quarter of fiscal 2009, 14.9% in the third quarter of fiscal 2009, 10.2% in the second quarter of fiscal 2009, and 8.2% in the first quarter of fiscal 2009.

GSIT yesterday announced the availability of SigmaQuad-IIIe^TM and SigmaDDR-IIIe^TM, two new SRAM products whose revolutionary architecture provides the ultimate in system performance, reliability, and flexibility for applications that require a high random address rate. They are specifically designed to meet the growing memory requirements of networking systems-the backbone of the Internet. At 625 MHz, the new 72Mbit Type-IIIe products feature the market’s fastest available Burst of 4 operation, which is 14% faster than the nearest competitor, and the market’s fastest Burst of 2 operation, which is 50% faster than the nearest competitor.

Packaged in a 260 BGA with checkerboard power and ground pin out, these devices deliver both high transaction rate operations and very high data bandwidth with dramatically improved signal integrity to control system noise. Additionally, new features have been added to ease host memory controller design and reduce Soft Error Rate (SER). GSI’s SigmaQuad/SigmaDDR-IIIe devices offer both obvious and subtle improvements over previous generations of Quad and DDR SRAM products. An improved input clocking scheme provides the ability to optimize input setup and hold times in a variety of board layout schemes and an improved output clocking scheme provides a more consistent and therefore a wider data output valid window. In addition, user-configurable output echo clocks can be centered or edge-aligned. There is also a selectable read pipeline length to maximize input clock frequency. Another feature is highly robust input termination available on all synchronous inputs to minimize signal reflections.

Source: http://www.gsitechnology.com/

Technical Analysis

GSIT’s recent volatility has been greater than normal. This is evidenced by the increased distance between the upper and lower Bollinger Bands. These bands measure volatility using standard deviation and a large width is due to high volatility. Additionally, GSIT is trading above its upper Bollinger Band. Relative to recent price action, the stock is currently overextended and due for either a pause or retracement.

The MACD for GSIT currently indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9-day moving average. Second, the MACD is above 0, which implies that the underlying moving averages are trending higher.

Comparative Analysis

Source: Thomson Financial

Insider Trading Activity

Source: Yahoo Finance

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