Stock Preacher

Intellon Corp. (Nasdaq: ITLN)

Intellon Corp. (ITLN), a leader in powerline communication (PLC) technology, designs and sells integrated circuits (ICs) that enable PCs, broadband modems, set-top boxes, gaming consoles, audio/video players, flat screen displays, security cameras and other electronics devices to communicate instantly over existing power lines , allowing consumers to create instant networks in their homes and small businesses. Aside from home networking, ITLN’s HomePlug® – compliant and other powerline ICs are also used in applications such as networked entertainment, Ethernet-over-Coax (EoC), smart grid management, and Broadband over Powerline (BPL) access.

Founded in 1989, ITLN is headquartered in Orlando, Florida and has offices in Ocala, Toronto, Canada, and San Jose, California.

Source: Reuters.com, Q2 Fiscal Financial Report
Financial Summary

Despite the general weakness in the semiconductor industry, ITLN’s total revenue for the second quarter of 2009 grew 13% sequentially to $17.5 million. The Company stated that the revenue derived from sales of HomePlug-compatible ICs comprised 99% of total revenue for the period and totaled $17.4 million, a 14% sequential increase from the first quarter of 2009.

GAAP net income came in at $0.3 million, or $0.01 per share (basic and diluted), for the second quarter of 2009, compared with breakeven results, or $0.00 per share (basic and diluted), for the first quarter of 2009, and a net loss of $0.2 million, or $0.01 per share (basic and diluted), for the second quarter of 2008, while non-GAAP net income in the second quarter of 2009 was $0.9 million, or $0.03 per share (basic and diluted), compared with non-GAAP net income of $0.5 million, or $0.02 per share (basic and diluted), for the first quarter of 2009, and non-GAAP net income of $0.2 million, or $0.01 per share (basic and diluted), for the second quarter of 2008.

According to ITLN chairman and CEO Charles E. Harris, cost reduction programs and favorable product mix fueled a 720 basis point year-over-year improvement in the Company’s gross margins, while favorable operating results and continuing balance sheet management also delivered a $2.7 million increase in cash, cash equivalents and short-term investments, which totaled $62.1 million at quarter end.

Source: Reuters.com

Analyst Consensus

Analysts polled by Thomson Reuters expect shares of ITLN to “Outperform.” The details of the analysts polled are as follows:

Source: Reuters.com

Investment Highlights

Intellon Corp. (ITLN) designs and sells integrated circuits (ICs) for power line communications (PLC), providing HomePlug® – compliant and other powerline ICs for home networking, networked entertainment, BPL access, Ethernet-over-Coax (EoC), smart grid management and other commercial applications.

A technology leader, ITLN has solved the problem of noise on the powerline, which was a significant challenge for this kind of network communication, by utilizing complex signal-processing algorithms. The Company created and patented the baseline technology for HomePlug 1.0, and is a major contributor to the baseline technology for the 200-Mbps PHY-rate HomePlug AV powerline standard and the draft IEEE P1901 powerline standard. ITLN is charter member of the HomePlug Powerline Alliance, founded in 2000 to promote and standardize networking over power lines.

The Company plays a major role in the development and commercialization of PLC technology across the globe, with 50 service providers, including AT&T, Canal+, Chunghwa Telecom, DirecTV, Dish Network, France Telecom, Free (Iliad Group), PCCW, SFR/neuf, Swisscom, Telecom Italia and Telenet, utiliIizing its products. Major OEMs manufacturing consumer electronics products based on the Company’s ICs include Actiontec, Asoka, Aztech, Belkin, devolo AG, EchoStar, LEA, Linksys, Logitech, Monster, Netgear and ZyXEL. INTL is the market share leader in the HomePlug IC market with more than 34 million HomePlug-based ICs sold.

The demand for INTL’s products reflects its strong reputation for innovation and quality. Last month, it was reported that Grid Net, a leading provider of policy-based network management system software and communications reference designs for Smart Grid, is using INTL’s INT6400 chipset in its advanced communications technology for smart electricity meters. NETGEAR also selected INTL’s INT6400 for its HomePlug AV-enabled Home Theater Internet Connection Kit. LinkSprite Technologies Inc., a provider of powerline (PLC) and wireless (RF) communication technology, is using the Company’s HomePlug-based powerline technology in a transceiver motherboard module that will connect UART-ported products to a powerline network. Also last month, KMC Controls, a provider of pneumatic and electronic controls for HVAC, building automation and energy management, is using INTL’s HomePlug powerline communications technology in an innovative programmable communicating thermostat (PCT) device that can communicate with a smart electricity meter with HomePlug powerline capability over existing electrical wiring and 24 VAC control lines in the home.

Looking to improve workflow and provide room for larger laboratories and future expansion, ITLN announced on September 4 that it is moving its Ocala operations to a new facility located in the expanding technology corridor in downtown Ocala, Florida. It expects to move into the new facility in December 2009 following the completion of renovations. INTL chairman and CEO Charlie Harris stated that the Company’s recent move is the third step in their program to increase the quality and efficiency of facilities across the Company.

On September 8, ITLN and wireless networking company Athero entered into a definitive agreement for the latter to acquire Intellon, a combination seen to pave the way for major advances toward seamless connectivity to operators and consumers alike. The small cap stock and cash transaction valued at approximately $244 million, or $181 million net of INTL’s cash, cash equivalents and short-term investments as of June 30, 2009, is expected to close in the fourth quarter of 2009.

INTL CEO Charlie Harris stated that the Company is excited about the opportunity to combine its knowledge and expertise in wired networking with Atheros’ leadership in wireless LAN and other network communications.

Technical Analysis

On Sept. 9, ITLN set a new 52-week high during the trading session when it reached $7.29. Over this period, the share price is up 76.66%.

Currently, The MACD for ITLN indicates a strong bullish signal for two reasons. First, the MACD is above the signal line, a 9-day moving average. Second, the MACD is above 0, which implies that the underlying moving averages are trending higher.

ITLN’s Bollinger Bands indicate a relatively stable condition as reflected by tighter than normal band width. Trading near its upper Bollinger Band, the pennystock suggests high price relative to its recent price action.

With share prices currently above the  stock’s 13-day moving average, a bullish trend is indicated. Also, a rising moving average signals that there has been buying interest in this pennystock.

Comparative Analysis

ITLN has a positive Return on Assets of 2.98%, compared with an industry average of -0.32%; Return on Investment of 3.42%, compared with an industry average of -0.49%; and a Return on Equity of 3.43%, compared with an industry average of -1.15%.

Source: Yahoo! Finance, Analyst Estimates.

Insider Trading Activity

NET SHARE PURCHASE ACTIVITY

Data provided by Thomson Financial

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