Piper Jaffray Comments On Rubicon Technology Following Earnings

Rubicon Technology RBCN turned in a great finish to 2010 but it remains cautious as it believes margins and pricing have peaked. After guiding pricing up for the past two quarters, management is now talking about stable pricing. Margins for 1Q11 are also guided down into the 50s from 63% in 4Q10, another indication that peak profitability levels are passing. Piper Jaffray expects increasing competition to challenge pricing further, thus it models price declines in the 2H11 and into 2012 with margins settling in the 40s. Concerns about competition, pricing and margins keeps cautious until it gets better visibility about how RBCN can respond to a more challenging industry landscape. Piper reiterates its Neutral rating and $25 price target. Piper Jaffray put RBCN in the middle of its 1Q11 guidance of $34-$36m in revenue and $0.62-$0.65 EPS. Beyond 1Q11, we look for steady revenue growth throughout 2011 and into 2012, while our estimates show margins dropping off from the high 50s level guided for in 1Q11 to margins we believe are more sustainable, in the 40s. RBCN closed Wednesday at $21.11