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EZchip Semiconductor: Ezchip Files Investor Presentation

The following excerpt is from the company's SEC filing.

Highlights Benefits of Merger Proposal with Mellanox Technologies, Ltd.

EZchip Board Unanimously Urges Shareholders to Vote FOR the Mellanox Transaction

- EZchip Semiconductor Ltd. (“EZchip” or the “Company”) (NASDAQ: EZCH), a leader in high-performance processing solutions for carrier and data center networks, today announced that it has filed an investor presentation with the U.S. Securities and Exchange Commission ("SEC") that outlines the benefits to EZchip shareholders of the Merger Proposal with Mellanox Technologies, Ltd. (“Mellanox”).

Highlights of the presentation include:

Reiteration of how the Merger Proposal with Mellanox, which is unanimously supported by EZchip’s Board of Directors, is in the best interest of shareholders. This conclusion is based in part on the following:

The attractive valuation that the Merger Proposal with Mellanox provides EZchip shareholders

$25.50 per share in cash offer price represents full and fair valuation to shareholders

Implied multiples compare favorably to peers and precedent semiconductor transactions

The execution risks for EZchip continuing on a stand-alone basis

EZchip has become the clear leader in network processors (NPUs), but NPUs represent a small addressable market ($367 million market (2014)

) in which the largest target routing customers are moving to developing NPUs in house:

Juniper in 2009 (EZchip’s largest customer at such time), Huawei in 2012 and most recently Cisco in 2015 (~35% of EZchip’s revenue in 1H 2015) decided to go in-house for NPU functionality

History with Juniper suggests winning Cisco back is very difficult due to its software investments around in-house ASIC

With ALU that always developed NPUs in house, these are the four largest routing vendors and EZchip’s largest potential customers

EZchip’s next generation NPS leapfrogs the competition but must win high volume white box router designs in data centers to offset the loss of the traditional routing vendors:

With its NPS product line, EZchip has won three tier-1 data center customers; however, it is not clear what revenue these design wins will translate to or when

It is possible that by the time the NPS-400 reaches volume production (currently projected in 2017) there will be other third party chips that are not NPUs, but will provide simpler and lower cost routing solutions for the vast majority of white boxes, which could significantly reduce the addressable market for the NPS-400

The Tilera acquisition enabled EZchip to enter the multi-core space and expand its addressable market (~$1.3bn estimate...