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Stock Alert for AuthenTec Inc. ($AUTH)

AuthenTec Inc. (NASDAQ: AUTH)

AuthenTec Inc. (AUTH) is a provider of security, identity management and touch control technologies for the personal computer (PC), wireless device and information technology (IT) markets. The Company provides a series of products, including fingerprint sensors, software and intellectual property (IP) cores. During the fiscal year ended January 1, 2010 (fiscal 2009), the Company shipped 10.3 million sensors. On July 8, 2009, it acquired certain assets of the biometric fingerprint sensor company, Atrua, LLC (Atrua). On February 26, 2010, the Company acquired SafeNet Inc.’s Embedded Security Solutions Division.

AuthenTec Inc. was founded in 1998 and is headquartered in Melbourne, Florida.

Share Statistics (13-May-10) FY

2007

FY

2008

%

Chg

Q4 2008 Q4 2009 %

Chg

Symbol AUTH Revenue, $Mn 52.34M 63.95M 22.2% 11.62M 8.32M 28.4%
Current price $3.10 Gross marg. 47.7% 47.8% 0.2% 45.5% 45.6% 0.2%
52wk Range: $3.49-1.59 Oper. margin -5.6% -3.5% 37.5% -15.0% -36.3% 142.0%
Avg Vol (3m): 111,861 Net margin -20.8% -257% 0.07% -11.5% -35.7% 210.4%
Market Cap. 92.69M
Dil. Shares Outst. 29.9M EPS, $ -0.80 0.01 108.8% -0.09 -0.04 55.6%

Source: Reuters.com, SEC Filings.

Financial Summary

AUTH a leading provider of security, identity management and touch control solutions, reported financial results for the first quarter 2010 ended April 2, 2010.

Highlights:

  • · First quarter consolidated revenue of $9.2 million, up 30% year-over-year
  • · Completed acquisition of SafeNet’s Embedded Security Solutions Division
  • · Introduced two smart sensors, the AES1750 for wireless market and the AES2660 for PCs
  • · Awarded significant design win with a leading PC OEM for 2011 models

Consolidated revenue was $9.2 million for the first quarter of 2010, a 30% increase over the prior year. The first quarter included $900,000 of revenue from AUTH’s Embedded Security Solutions, which was acquired from SafeNet Inc. in late February. AUTH’s fingerprint sensor business, now called Smart Sensor Solutions, reported revenue of $8.2 million during the quarter, which was at the midpoint of the $8.0 million to $8.4 million guidance previously provided. Smart Sensor revenue increased 17% over the $7.0 million reported in the first quarter of 2009, and was comparable with the $8.3 million recorded in the fourth quarter of 2009. The year-on-year revenue growth in Smart Sensors was driven by increased sales of both PC and wireless products, reflecting improved economic conditions.

GAAP Results:

Under Generally Accepted Accounting Principles (GAAP), consolidated net loss for the first quarter of 2010 was $4.7 million, or $0.16 per diluted share. This compares to a GAAP net loss of $4.5 million, or $0.16 per diluted share, in the first quarter of 2009 and a GAAP net loss of $3.0 million, or $0.10 per diluted share, in the fourth quarter of 2009.

GAAP gross margin in the first quarter improved to 48.5%, compared to 48.0% in the first quarter of 2009, and 45.5% in the fourth quarter of 2009. Total operating expenses on a GAAP basis were $9.2 million, compared to $8.0 million in the first quarter of 2009 and $6.8 million in the fourth quarter of 2009.

Non-GAAP Results:

On a non-GAAP basis, consolidated net loss for the first quarter of 2010 was $2.4 million or $0.08 per diluted share. Non-GAAP net loss for Smart Sensors was approximately $2.4 million and $50,000 for the Embedded Security business. The non-GAAP results exclude certain legal and other costs including those associated with the Embedded Security Solutions acquisition and the UPEK proxy action, along with stock-based compensation and amortization of acquired intangible assets. This compares to a non-GAAP net loss of $3.6 million, or $0.12 per diluted share, in the first quarter of 2009 and non-GAAP loss of $1.7 million, or $0.06 per diluted share, in the fourth quarter of 2009. The sequential increase in operating loss was primarily due to increased legal expenses related to the patent litigation with UPEK and higher costs related to the year-end financial audit.

Non-GAAP gross margin in the first quarter was 50.2%, compared to 48.8% in the first quarter of 2009 and 46.1% in the fourth quarter of 2009. The sequential increase in gross margin was due primarily to one month of Embedded Security revenue contribution, which has a substantially higher margin than Smart Sensors, combined with lower inventory provisions in the Smart Sensor business during the quarter.

Total operating expenses on a non-GAAP basis were $7.1 million, compared to $7.2 million in the first quarter of 2009 and $5.6 million in the fourth quarter of 2009. Excluding $800,000 in operating expenses of the Embedded Security business for one month, operating expenses were lower in the first quarter of 2010 as compared to the first quarter of 2009 primarily due to reductions in the use of contractors and other outside services.

AUTH ended the first quarter of 2010 with $45.3 million in cash and investments. This compares to $55.5 million in cash and investments at the end of the fourth quarter of 2009. The use of cash primarily reflects the purchase of the Embedded Security business, which included a cash payment of $8.5 million. The Embedded Security acquisition was recorded under purchase accounting based on preliminary valuation estimates, which will be further refined in the second quarter.

Financial Strength (13-May-2010) Company Industry Sector S&P 500
Quick Ratio (MRQ) 9.71 0.51 1.38 0.78
Current Ratio (MRQ) 10.10 0.61 1.61 0.93
Long-Term Debt to Equity (MRQ) 0.00 9.13 17.45 134.02
Total Debt to Equity (MRQ) 0.00 12.96 28.18 200.34

Source: Reuters.com, SEC Filings.

Analyst Consensus

Buy Outperform Hold Underperform Sell No Opinion

This is the consensus forecast amongst six polled investment analysts. Against the AuthenTec Inc company.

Analyst Detail Buy Outperform Hold Underperform Sell No Opinion
Latest 0 1 5 0 0 0
4 weeks ago 0 1 5 0 0 0
2 months ago 0 1 5 0 0 0
3 months ago 0 1 5 0 0 0
Last year 0 1 6 0 0 0

The three analysts offering 12-month price targets for AUTH have a median target of 3.00, with a high estimate of 4.00 and a low estimate of 2.00. The median estimate represents a 25.00% increase from the last price of 2.40.

Source: www.ft.com

Consensus Estimates Analysis

# of Estimates Mean High Low 1 Year Ago
SALES (in millions)
Quarter Ending Jun-10 6 9.99 12.20 8.20 9.75
Quarter Ending Sep-10 6 10.51 12.70 8.20 12.25
Year Ending Dec-10 6 40.36 47.40 34.17 42.72
Year Ending Dec-11 3 52.73 60.70 40.00
EARNINGS (per share)
Quarter Ending Jun-10 6 -0.08 -0.06 -0.13 -0.05
Quarter Ending Sep-10 6 -0.06 -0.04 -0.11 -0.01
Year Ending Dec-10 6 -0.28 -0.20 -0.44 -0.17
Year Ending Dec-11 2 -0.06 -0.03 -0.09
LT Growth Rate (%) 2 32.50 35.00 30.00 32.50

Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=AUTH.W

Investment Highlights

AUTH recently announced that it has won designs in five new Personal Navigation Assistants (PNAs) now available from MEDION in Europe. Each of MEDION’s new GoPal P4445/ P4440, P4245, X4545 and X4345 and PNAs include AUTH’s AES1711 TruePrint(R) smart sensor for keeping personal data protected, one-touch access to individual user profiles and theft deterrence. AUTH and MEDION previously collaborated on the world’s first fingerprint-enabled PNA, the MEDION GoPal P4425, which was launched in 2008.

MEDION’s newest PNAs, the X4545 and X4345 were announced at CEBIT. The MEDION GoPal X4545 is a 4.7-inch touchscreen PNA with a SiRFprima(TM) 600 MHz processor with speech control for hands-free operation, including GPSpro allowing navigation in case of loss of GPS signals in tunnels, and integrated Bluetooth and FM transmitter for wireless transfer of MP3 music and driving instructions via the car’s sound system. The MEDION GoPal X4345 offers these same features but without the Bluetooth hands-free functionality.

MEDION’s GoPal P4445 is a 4.7-inch touchscreen PNA that features a 400 MHz processor, voice command capability for hands-free operation, an integrated MP3 player and other advanced features. MEDION GoPal P4440 is a 4.7-inch touchscreen PNA that integrates features including text-to-speech, enhanced lane assistant, and Bluetooth and FM transmitter technology. The MEDION GoPal P4245 is also a 4.7-inch touchscreen PNA and belongs to MEDION’s high-end range. It is the best solution for those who would like to have a full-featured device but don’t need the Bluetooth(R) functionality.

AUTH’s AES1711 smart sensor is based on TruePrint(R) technology, AuthenTec’s patented and unique solution that reads below the surface of the skin to the live layer where a person’s true fingerprint resides. This patented subsurface approach enables AuthenTec sensors to read virtually every fingerprint, every time — a critical requirement in any fingerprint-enabled device.

AUTH is an ISO9001-certified provider of fingerprint sensors and solutions with the broadest product and IP portfolio in the silicon fingerprint sensor industry with 144 U.S. patents issued and pending (as well as additional foreign patents). AUTH recently expanded its offering to include complete solutions for security, identity management and touch control via its new smart sensor hardware, software, and client applications as well as new products and IP from the Company’s recent acquisition of SafeNet’s Embedded Security Solutions Division.

Source: http://www.authentec.com/

Technical Analysis

Source: http://stockcharts.com

AUTH is trading above its 50-day moving average. This is considered to be the sign of a bullish trend. There is added weight to this indication because the moving average is rising and suggests that there has been buying interest in this stock.

AUTH’s recent volatility has been greater than normal. This is evidenced by the increased distance between the upper and lower Bollinger Bands. These bands measure volatility using standard deviation and a large width is due to high volatility. Additionally, AUTH is trading above its upper Bollinger Band. Relative to recent price action, the stock is currently overextended and due for either a pause or retracement.

The MACD for AUTH currently indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9-day moving average. Second, the MACD is above zero, which implies that the underlying moving averages are trending higher.

Comparative Analysis

Company Name Ticker Price per Mrkt. Cap. P/E P/S
May13-2010 symbol Share, $ $ Mn 2009 2010 2009 2010
Conexant Systems Inc. CNXT 3.03 239.62M 23.95 n/a 1.11 n/a
Integrated Silicon Solutions Inc. ISSI 11.19 280.86M 16.94 n/a 1.74 n/a
Silicon Storage Technology Inc. SSTI 3.05 351.96M n/a n/a 1.39 n/a
Semiconductor Median 290.81M 20.44 n/a 1.41 n/a
AuthenTec Inc. AUTH 3.10 92.69M n/a n/a 2.09 n/a

Source: Thomson Financial

Insider Trading Activity

NET SHARES PURCHASE ACTIVITY

Inside Purchases – Last 6 Months

Shares Transaction
Purchases n/a 0
Sales n/a 0
Net Shares Purchased (Sold) n/a 0
Total Insider Shares Held 4.21M n/a
% Net Shares Purchased (Sold) 0.0% n/a
Net Institutional Purchases — Prior Qtr to Latest Qtr
Shares
Net Shares Purchased (Sold) (1,294,390)
% Change in Institutional Shares Held (16.9%)

Source: Yahoo Finance

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