EZChip Plunges as Huawei In-House Product May Cut Revenue

EZchip Semiconductor Ltd. sank to the lowest level in two years after saying that revenue may be reduced should one of its customers develop a product that will negate the need for the Israeli company’s technology.

EZchip, which makes chips for network routers, tumbled 21 percent to $25.50 by 12:53 p.m. in New York, set for the lowest close since December 2010 and the steepest one-day slide since August last year.

Huawei Technologies Co., a Chinese maker of telecommunications equipment, is developing an in-house processor and will use EZchip’s product only “when needed,” Eli Fruchter, chief executive officer of the Israeli company, said on a conference call today after the company reported 2012 earnings. He added that the development was still “mere speculation,” according to a call transcript.

“EZchip doesn’t trade on what they’re going to do tomorrow or a year from now, they trade mostly on their long-term growth prospects,” Dov Rozenberg, an analyst at Clal Finance Batucha Brokerage Ltd. in Tel Aviv who rates EZchip a buy, said by phone. Should Huawei be developing an in-house product that will erode EZchip’s share of the market and “lowers the long-term growth expectations” for the Yokneam, Israel-based company, Rozenberg said.

A phone message left for Jannie Luong, a North American spokeswoman for Shenzhen-based Huawei, wasn’t immediately returned.

To contact the reporter on this story: Victoria Stilwell in New York at vstilwell1@bloomberg.net

To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.