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GPS obsessed

21 August 2018

Is It A Good Time To Buy SiRF Stock?

images Is It A Good Time To Buy SiRF Stock?

Most of us aren’t too comfortable with the idea of buying technology stocks at the moment, especially in the volatile and highly competitive semiconductor market.  But a couple of articles from Seeking Alpha over the past few days have highlighted a few things about GPS chipmaker SiRF that point to a stock buying opportunity.  Albeit a risky one.

Currently and arguably, SiRF’s biggest problem is the ongoing patent dispute with Broadcom.  On August 8 the International Trade Commission ruled that SiRF did indeed infringe on Broadcom patents via the company’s acquisition of Global Locate.  Worse yet, August 26 brought forth a judge that recommended any devices containing SiRF products infringing Broadcom patents be banned from importation into the United States.  Though the ruling is being appealed, if upheld SiRF would be forced to license said products through Broadcom obviously costing the company a lot of cash.

Seeking Alpha’s Joe O’Donnell also argues that the patent dispute puts into question the value of SiRF’s intellectual property, hurting its chances for acquisition.

BUT, SiRF’s share price is sitting around $1.10, and while SiRF expects their cash on hand to decrease by $20 million to $60 million over the next two years, the company’s book value is sitting at $215.6 million.  What’s interesting is that SiRF’s market capitalization currently is only $64.8 million and its enterprise value is -$41.1 million.  These number make SiRF’s share price look undervalued.

But should you buy?

Joe O’Donnell would wait until the stock price drops another 25%.  But another factor comes into play here.  Remember that SiRF is a member of Google’s Open Handset Alliance (so is Broadcom and Qualcomm) and is believed to be the provider of the GPS chipset in the T-Mobile G1 coming October 22.  If this is the case, and T-Mobile really has had 1.5 million pre-ordered G1’s, then SiRF’s current market capitalization should be only a fraction of the revenues their Google partnership should generate.

Should SiRF formally announce October 22 that they are indeed the chipset supplier for the G1 then it would be reasonable to believe their $1.10 share price should move a little closer to the $2.79 book value.  Seeking Alpha’s Richard Jones is long SiRF, expecting the share price to top out around $1.75-$1.80 over the coming days.

So it’s a tough call.  One analyst is content to wait until SiRF’s share price falls another 25% before buying even though he concedes it’s undervalued.  Another analyst expects the share price to skyrocket, relatively speaking, in the coming days.  I’m torn.  Until the patent dispute is settled I wouldn’t buy and with the global economy in a rut and PND prices seemingly falling more everyday, the long term outlook for GPS chipmakers looks dark in my opinion.

I’ll be watching SiRF’s stock price closely October 22 and I’ll say more than.  But are you going to buy?

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