Zacks Analyst Interview Highlights: Power Integrations

Business Wire, April 18, 2006

CHICAGO -- Zacks.com releases the latest Analyst Interview. Today's interview is with Zacks Equity Analyst Ken Nagy, who discusses Power Integrations (Nasdaq:POWI).

A synopsis of today's Analyst Interview is presented below. The full article can be read at http://at.zacks.com/?id=2678.

What is the catalyst for power semiconductors at this time?

With worldwide energy standards becoming more stringent, we are optimistic about power technology. In particular, several new government standards are being enacted that will force new products to adopt newer technologies, displacing the inefficient legacy linear transformers.

The standards imposed by the California Energy Commission (CEC) will become mandatory for all external power supplies by January 2007. This is a critical event given that California is the seventh largest economy in the world and usually the pioneer in leading edge legislation that many other states usually adopt later. For instance, in January of 2005, the CEC standards were adopted by the U.S. EPA for the Energy Star program. The voluntary Energy Star program is attempting to modify consumer behavior, and is hopefully encouraging consumers to economically support energy efficient products. Qualifying products must comply with the program standards in order to earn an Energy Star.

Washington State and Arizona have both since adopted the same California standard. China recently announced a new voluntary program similar to the Energy Star program, and has also adopted the California standards. The European Commission has set European standards for energy-efficient external AC/DC power supplies that are even more stringent than the CEC standards, although it is initially on a voluntary basis. Australia not only adopted the CEC standards, but made compliance mandatory by April 2006.

The current worldwide energy situation has created greater sensitivity to the burgeoning problem. Power Integrations (Nasdaq: POWI) integrated power products conform to these new standards. As customers begin to design-in integrated power ICs that are in conformance with these new energy efficiency standards, POWI should be able to capitalize on the conversion.

Are there any specific developments worth citing?

Well, the California Energy Commission recently pushed out an industry mandate that would have created an earnings catalyst. The CEC conducted a hearing the first week of February as OEMs requested a delay in the implementation of the external power supply standard. On Wednesday, February 15, the CEC delayed the mandate until January 1st 2007.

This is a little disappointing for investors, but it just means earnings (say $0.03-0.05 in POWI's case) will be pushed off for about six months. Also, there is some question whether or not other states follow California's lead in delaying this standard. At this point, it still remains to be seen.

Read the full interview at http://at.zacks.com/?id=2647.

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