Meet the Israeli Company Getting a Bite of Apple's New iPhone

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Customers checking out the new Apple iPhone 7 at the Apple Store at the Grove in Los Angeles on Friday, Sept. 16, 2016.
Customers checking out the new Apple iPhone 7 at the Apple Store at the Grove in Los Angeles on Friday, Sept. 16, 2016. Credit: Richard Vogel/AP

Like every new iPhone launch, Apple's release of the iPhone 7 created a worldwide buzz. After its release, experts physically dissemble the device, known as a "teardown" to discover which components the company used to create its latest flagship product.

A big winner of these teardowns was Israeli firm Ceva, which licenses its designs to chipmakers such as Intel and Samsung, which in turn embed its digital signal processors within their chip sets, reducing the time and cost it takes them to bring products to market.

The teardowns showed that for the first time Intel's thin modem, which uses Ceva's design, is in some versions of Apple's new smartphone. For the last several years Intel's competitor Qualcomm dominated the market for these chips.

Ceva has not commented what royalties it expects for the sale of each iPhone, but industry observers value them at 9 cents per device.

The good news for the company, which last had its products in Intel's chip sets five years ago in the iPhone 3 and iPhone 4, continued Monday when Canaccord Genuity raised its price target for Ceva from $38 per share to $40 per share. Its stock price on Nasdaq jumped 10.3% to a record $34.99 on turnover of $571,000, four times its average daily turnover, in wake of the news. The investment firm, as well as Benchmark, which kept its price target at $36, and Wunderlich all rated Ceva a buy.

Concord analysts also raised their profit projections for Ceva, stating in their recommendation that they expect company royalties to continue to pour in during 2017 and beyond. Revenue for the company grew 28% to $17 million in the second quarter of 2016.

The company was valued at $733 million following the  surge in its stock price.

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