Jefferies: Cavium's Upside Potential

In a research report published this morning, Cavium

hosted investor meetings that increased conviction in Jefferies' non-consensus view concerning wireless base stations. According to Jefferies, "The CEO explained Cavium's recent earnings disappointments were driven by a combination of 1) weak Service Provider demand, 2) a pause in new products entering production, and 3) a Cisco-related inventory hub transition, which resulted in revenue impact of ~10% per quarter. As of Q2, Service Provider bookings have picked up, new BTS products are entering production, shipments into Cisco are in the process of returning to normalcy, and multiple new customer platforms are likely to enter production in 2H. Additionally, Cavium is taking a more conservative approach in judging the timing of its customer product ramps." Jefferies maintains its Buy rating and $37 PT on Cavium.