AMBA nice article on Seeking Alpha

This is from a public seeking alpha article:

With shares plunging toward $40 on Monday, the company’s cash balance of more than $276 million rose to more than 20% of the stock’s market cap. (AMBA) produced more than $93 million in operating cash flow during the first nine months of the fiscal year (which ends this January). The balance sheet is in pristine shape with no debt…

GoPro’s troubles caused Ambarella to cut its fiscal 2017 revenue growth forecast in early December. However, management is still looking for 15% to 20% revenue growth, which is well above what many semiconductor names are seeing. The growth from Ambarella will mostly come from its expanding drone platform, and the company recently unveiled some new chips at CES. Expectations have certainly come down, but so has the stock. While GoPro isn’t growing like it used to be, the company isn’t going out of business and that will still result in revenues for Ambarella.

The drone market is expected to show dramatic growth in coming years, and big chipmakers like Intel and Qualcomm are trying to jump in. But just like its mobile business, Intel is well behind Ambarella in this race. Qualcomm is looking to drones to help offset struggles in its phone business. One of these two chip giants could easily look to acquire Ambarella, even if it is just to stop the other from purchasing the small company.

At this point, Ambarella’s valuation makes it a very interesting acquisition candidate. When you take out the company’s cash position, the market cap is just barely over $1 billion, or about three times the company’s fiscal 2017 revenues. Remember, Intel just paid more than 7 times ex-cash expected revenues to acquire Altera…(It’s) a drop in the bucket for larger chipmakers. Qualcomm bought back over $11 billion worth of shares in its most recent fiscal year, and Intel management seems willing to make more acquisitions to bolster future growth.…


That is definitely a great article. I agree if Intel or Qualcomm really wanted to seriously go after the camera market they need to buy Ambarella. Ambarella may be small and they don’t have near the cash flows. Though Ambarella is focused and they have a lot of very smart workers with a lot of internal product knowledge built up for years. No matter how much money Qualcomm or Intel wanted to throw at the situation I doubt they could build such a R&D team specialized in video and computer vision in any reasonable amount of time. These types of people also aren’t often swayed by big bags of money. They go where the most interesting technology and opportunities to advance it exist. Many of these unfocused giants tend to lose this type due to their eventual loss of focus.
Whether they like it or not Ambarella is the top dog in their little niche and the one to beat.

Gopro just announced sluggish holiday sales…down more than 20 percent in after hours.

Amba down about 10 percent as a result.

Be careful out there.

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Gopro just announced sluggish holiday sales…down more than 20 percent in after hours.

Amba down about 10 percent as a result.

Of course this just happened, I just bought some AMBA today.

My timing is impeccable!

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I can’t see AMBA being an acquisition target. AMBA had $313M TTM revenue. INTC had $55.2B TTM revenue. AMBA’s revenue doesn’t even show up on INTC’s financial statements.

And chances are if one of the giants bought AMBA a lot of their engineers would quickly exit. After a certain point, salary is not a big motivator, most of AMBA’s engineers are already at that point. What these guys work for after the money is no longer an issue is the feeling of making a difference and the ability to walk in to the CEO’s office and have a conversation, being an equal of the boss, and having a boss with whom they can have a technical discussion.

In a company like Intel, it’s very hard to see where your intellectual contribution shows up in a product, and even if you can recognize it, no one else can. And the top dogs are seldom up to speed with the most recent technology. Bosses talk about budgets and schedules, not design trade offs or detailed manufacturing processes. There is a loss of that sense of being on the same playing field. So the potential that was purchased has often quit in the first year.