Stock Watch
PortalPlayer: Striking a Chord
This specialty chip maker is benefitting from the popularity of the iPod.
September 13, 2005
PortalPlayer (PLAY) is riding the success of Apple Computer's iPod. The designer of specialty semiconductors makes technology used in Apple's popular music players, including the new iPod nano that debuted last week.
Shares of PortalPlayer have been on a bumpy ride since the company went public last November. But after falling to a low of $16 in April, the stock has soared more than 75%, to $28.
Inventec, which builds the iPod, accounts for 90% of PortalPlayer's sales.
Quinn Bolton, an analyst at investment firm Needham & Co., figures the launch of the nano should be a boon to PortalPlayer, although he does note that, when it comes to the stock, it's risky for the company to generate such a high percentage of its revenues from one customer.
PortalPlayer is a favorite of Zach Shafron, manager of Ivy Science & Technology fund. He says the company's relationship with Apple will grow but that "there are other opportunities to bring on a significant number of additional customers."
The Santa Clara, Cal., company plans to court other audio-device manufacturers aggressively with the lure of bells and whistles, such as video capability, for portable media players.
Analysts surveyed by Thomson First Call predict that the company can grow earnings more than 25% annually over the next five years. The shares sell for 21 times analysts' estimated 2005 profit of $1.34 a share.
--Katy Marquardt and Lisa Dixon
