Pixelworks, Inc. (
soared 87.5% ($4.20) to $9.00 on Mar 6, 2014, after it announced
Apple Inc. (
accounted for more than 10.0% of its revenues in 2013. Pixelworks
earned revenues of $48.1 million in 2013.
Pixelworks' solutions are used for processing high-end digital
video applications. Its technology solves judder and motion blur
problem and also reduces halo effects on any screen. Pixelworks'
solutions help in converting low resolution content to high
resolution display and also deliver high-quality mobile video on
Although it is not exactly clear what Pixelworks is supplying to
Apple, the revelation has started a strong rumor-mill about the
iPhone makers' next innovative device. It is a well-known fact
that Apple is developing wearable devices, which, according to
its Chief Executive Officer (CEO) Tim Cook, is an interesting
In an interview at All Things D's D11 Conference, CEO Cook had
specified that Apple TV continues to hold great importance for
the company. The growing relationship with Pixelworks suggests
that Apple could use its technology in overhauling the long
awaited iTV. Apple can also use it in building high-resolution
screens for mobile and wearable devices.
Nonetheless, we believe this is an important relationship for
both Pixelworks and Apple. The association will not only drive
Pixelworks' top line but also improve its competitive position.
We also believe that Pixelworks can be a prospective acquisition
candidate for Apple.
Apple has a habit of grabbing small companies and start-ups,
whose technology boosts and extends its eco-system. In this
regard, Pixelworks is a perfect fit as it will boost Apple's
footprint in the smart television market, where Samsung has a
Apple continues to lose market share against
Android operating system and handset maker, Samsung. Tim Cook
also admitted that iPhone sales in North America were stalled in
the first quarter, which is a major concern.
Although the distribution partnership with
China Mobile (
and partnerships with 50 new carriers are positive for overall
sales, sluggish North American business will negatively impact
gross margins. Moreover, lack of a new innovative product
continues to remain an overhang on the stock.
Currently, Pixelworks has a Zacks Rank #4 (Sell). We believe the
revelation of the Apple relationship will significantly improve
analyst estimates for Pixelworks in the near term, which should
boost its Zacks Rank.
Apple has a Zacks Rank #3 (Hold).
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