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EZchip Jumps as Concern Over Cisco’s Own Chip Abates

EZchip Semiconductor Ltd., Israel’s second-largest chipmaker, climbed the most in two years in New York as concern eased that Cisco Systems Inc.’s new processor will compete with its products.

Shares of EZchip, based in Yokneam, Israel, jumped 16 percent to $26.10 at 1:38 p.m. in New York, set for the biggest gain since August 2011. Trading volume was 10 times the daily average of the past 90 days. The stock traded at a 15 percent premium over its Tel Aviv shares, the widest in 16 months.

EZchip plunged 21 percent on Sept. 12 when Cisco, its biggest customer with 40 percent of revenue, said it developed its own nPower integrated network processor. The San Jose, California-based chipmaker announced today it will use the processor in new network convergence systems that neither previously used, nor were poised to use, EZCH’s product, according to Feltl & Co.

“Given the announced nPower products do not compete with current EZCH-based products, such as the ASR-9000, we don’t believe the EZCH growth story has changed,” Jeffrey A Schreiner, a Minneapolis-based analyst at Feltl, wrote in a research note today. EZchip “remains undervalued relative to edge routing market strength.”

Schreiner reiterated a strong buy recommendation on EZchip with a price target of $39, implying a 52 percent gain.

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