Netlogic satisfies

NETL reported revs and EPS ahead of expectations and guidance was better than expected also. What was a big positive for me was the ability of NETL of to deliver a solid 10% revenue growth without any growth driven from its largest customer- CSCO. There has been plenty of naysayers out there blabbering about how a majority of NETL revenues are dervied from CSCO and how that is a bad thing. I agree there are risks when you have a large portion of revenue from one customer- like PLAY. What I disagree with is the premise that NETL lives or dies with CSCO. NETL delivered a staggering 50% growth sequentially from customers other than CSCO. NETL was also able to deliver strong gross margins even after giving CSCO some price discounts. The reason CSCO sticks with NETL is not because there is a inside connection; CSCO is as entrepreneurial as they come and the reason CSCO is sticking with NETL is because NETL has superior products at price points that make them the only choice. Yea one day IDTI will be able to get few more sockets with its IBM-bought products but that day NETL will be on the next chapter- like the partnership with AMD or BRCM. And we know CSCO keeps trying to make these chips in-house so there is always risk.

CSCO revenues for NETL were down 5% sequentially and it does not mean CSCO is having a bad quarter. CSCO quarter is having some issues at the end but they will pull it out just fine. NETL is not for a faint of heart but if you want a superior technology name with strong IP and customer roster most semis companies would die for then NETL is for you. Yea you have to pay up to own quality name just like QCOM and I am willing to bet NETL continues to perform.