Needham Upgrades O2Micro International

Analyst Quinn Bolton says the high-performance intergrated circuit company could reduce costs and improve gross margins on an initiative to use Chinese subcontractors

Needham upgrades high-performance intergrated circuit company O2Micro International (OIIM ) to strong buy from buy.

Analyst Quinn Bolton says based on channel checks during the trip to Asia, he thinks demand is fundamentally healthy for the company's consumer (LCD panel backlight inverter) business.

He raises his 29 cents 2005 earnings per share estimate to 31 cents, and his 60 cents 2006 earnings per share estimate to 65 cents. He believes the additional upside to his revised estimates exists.

Bolton notes O2Micro is embarking on an initiative to source certain manfacturing requirements from Chinese subcontractors that could reduce costs and provide a further boost to its already high gross margin over the next two years. He raises his 12-month price target to $17.

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