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    Stock Alert for Netlist Inc. (NLST)

    Netlist Inc. (NLST) engages in the design and manufacture of high-performance, logic-based memory subsystems for server and storage applications for cloud computing. Its flagship products include HyperCloud™, a patented memory technology that breaks traditional memory barriers, NVvault™ family of products that enables data retention during power interruption, EXPRESSvault™, a PCI Express backup/recovery solution for cache data protection and a robust portfolio of high performance and specialty memory subsystems including HyperStream, VLP (very low profile) DIMMs and Planar-X RDIMMs.  NLST develops technology solutions for customer applications in which high-speed, high-capacity, small form factor and heat dissipation are key requirements for system memory. These customers include OEMs that design and build tower servers, rack-mounted servers, blade servers, high-performance computing clusters, engineering workstations and telecommunications equipment.

    Share Statistics (15-Nov-11)   FY

    2010

    FY

    2011

    %

    Chg

    Q3

    2010

    Q3

    2011

    %

    Chg

    Symbol NLST Revenue, $Mn 18.48 37.85 104.8% 9.30 16.00 72.0%
    Current price $2.92 Gross marg. 16.0% 26.3% 64.4% 19.6% 30.9% 57.7%
    52wk Range: $1.04-$3.22 Oper. margin -41.9% -8.8%
    Avg Vol (3m): 92,191 Net margin 69.9% 39.9% -42.9% -42.7% -9.4% -78.0%
    Market Cap. 74.00M              
    Shares Outstanding 25.34M EPS, $ -0.65 -0.64 -1.5% -0.16 -0.06 -62.5%

    Source: Reuters.com, SEC Filings.

    Investment Highlights

    NLST shares surged to a fresh 52-week high of $3.22 on Tuesday, buoyed by news the company has reached agreements with both International Business Machines Corp. (IBM) (NYSE: IBM) and Hewlett-Packard (HP) (NYSE: HPQ).  Over 6.68 million shares traded hands during the session,  nearly 15 times the 10-day average.

    Shares of the Irvine, CA-based company have gained 83.1% in the last five days; 122.0% in the last month; and 2.1% year-to-date.

    In a regulatory filing late Monday, NLST said it agreed to cooperate with IBM with respect to the qualification of the Company’s HyperCloud technology for use with IBM servers and to engage in certain joint marketing efforts if qualification is achieved. Both companies agreed to commit resources and funds in support of these activities.

    In a similar deal, HP and NLST made an agreement to cooperate with respect to the qualification of HyperCloud technology for use with HP servers and to engage in certain joint marketing efforts if qualification is achieved. Both companies have also agreed to commit resources and funds in support of these activities, and to collaborate on the future use of HyperCloud’s load reduction and rank multiplication technologies for next generation server memory for HP.

    The agreement with IBM is non-exclusive, while the HP deal is exclusive for a period of time.

    Latest Product News

    NLST on Monday unveiled the industry’s first 32GB Virtual Dual Rank (2vR) RDIMM (registered dual inline memory module). The new HyperCloud module enables an unprecedented 768GB of RDIMM memory capacity in the next generation two-processor servers.

    “By delivering the industry’s first 32GB 2vR RDIMM, we are able to offer our customers unprecedented memory capacity with efficient economics associated with widely available DRAM components,” commented Steve McClure, NLST vice president of worldwide sales and marketing.

    “The processing of large data sets at high CPU speeds requires large amounts of dynamic memory to avoid costly disk drive wait times. With the new 32GB HyperCloud, our OEM customers can maximize server utilization and application performance which translate into differentiated value for their products.”

    Source:

    http://biz.yahoo.com/e/111114/nlst8-k.html?legacy=1

    http://www.netlist.com/investors/investors.html

    Financial Summary

    NLST reported revenues of $16.3 million for the third quarter ended October 1, 2011, up 55% from revenues of $10.6 million for the third quarter ended October 2, 2010.  Gross profit for the laster quarter was $5.5 million, or 34% of revenues, compared to a gross profit of $3.0 million, or 29% of revenues, in the comparable quarter last year, an increase of 83%.

    Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) after adding back net interest expense, income taxes, depreciation, amortization, stock-based compensation and net non-operating income was $32 K for the latest quarter, compared to an adjusted EBITDA loss of $4.0 million for the prior year period.

    The Company saw a net loss of $1.0 million, or $0.04 loss per share, in the third quarter, an improvement of 79% compared to the net loss in the prior year period of $4.9 million, or $0.20 loss per share.  These results include stock-based compensation expense in the third quarter ended October 1, 2011, of $0.5 million compared with $0.4 million in the year-earlier period.

    As of October 1, 2011, cash, cash equivalents, and investments in marketable securities were $11 million, total assets were $31 million, working capital was $16 million, total debt was $4 million, and stockholders’ equity was $18 million.

    Source: http://www.b2i.us/profiles/investor/ResLibraryView.asp?ResLibraryID=48857&GoTopage=1&Category=1629&BzID=1941

    Financial Strength (15-Nov-2011)

    # of Estimates

    Mean

    High

    Low

    1 Year Ago

    SALES (in millions)
    Quarter Ending Dec-11 1 18.75 18.75 18.75 34.10
    Quarter Ending Mar-12 1 18.80 18.80 18.80
    Year Ending Dec-11 1 64.50 64.50 64.50 103.50
    Year Ending Dec-12 1 80.55 80.55 80.55
    EARNINGS (per share)
    Quarter Ending Dec-11 1 -0.07 -0.07 -0.07 0.06
    Quarter Ending Mar-12 1 -0.08 -0.08 -0.08
    Year Ending Dec-11 1 -0.33 -0.33 -0.33 -0.10
    Year Ending Dec-12 1 -0.28 -0.28 -0.28

    Source: Reuters.com, SEC Filings.

    Technical Analysis

    Source: http://stockcharts.com

    NLST is above the upper Bollinger Band, implying that it is currently extended from its recent trend. Be aware, however, that a cross outside of the Bollinger Bands can sometimes be a signal of trend strength and not, necessarily, trend reversal.

    The MACD for NLST 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 0, which implies that the underlying moving averages are trending higher.

    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/S
    Nov15-2011 symbol Share, $ $ Mn 2011 2012 2011 2012
    Micron Technology Inc. MU 5.56 5.49B 30.89 9.27 0.61 0.55
    STEC Inc. STEC 10.57 486.34M 15.10 50.33 1.58 1.84
    Semiconductor – Memory Chips Median       31.94 n/a 2.29 n/a
    Netlist Inc. NLST 2.90 73.50M n/a n/a 1.14 0.91

    Source: Thomson Financial

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