This column is for investors willing to take more risk and potentially receive more reward.  The stocks mentioned in this column are not recommended to buy or sell.  They're brought to your attention so you can investigate them further to determine if they fit your risk profile.  Most of the stocks will have less than $1 billion of market capitalization, have more volatility than other stocks, and oftentimes no earnings.  And some will have tremendous stories.

January 14, 2010 - CEVA, Inc. (CEVA-NASDAQ) and its subsidiaries engage in designing and licensing silicon intellectual property (SIP) for handsets, portable multimedia, and consumer electronics markets. The company licenses digital signal processor (DSP) cores in the form of a hardware description language definition; DSP-based subsystems, including hardware components integrated with the DSP core to form a system-on-chip (SoC) design; a portfolio of application-specific platforms, including video, audio, voice over Internet protocols (VoIP), Bluetooth, and Serial Advanced Technology Attachment; and various software components.

The company licenses its portfolio of DSP cores, subsystems, and platforms to semiconductor and original equipment manufacturer companies worldwide to incorporate the company's IP into application-specific integrated circuits and application-specific standard products that they manufacture, market, and sell to consumer electronics companies. It has a collaboration agreement with mimoOn GmbH for the development of LTE baseband solutions.

The company was formerly known as ParthusCeva, Inc. and changed its name to CEVA, Inc. in December 2003. CEVA, Inc. was founded in 1999 and is headquartered in San Jose, California.

Here's what caught my eye: Earnings have increased noticably for the last several years, years that were devastating for most companies. The total earnings for 2009 should come in at 41 cents according to the 5 analysts covering the stock. That's 28% better than the 32 cents the company made in 2008. This year, analysts estimate 45 cents a share. Earnings for the last quarter of 2009 and the full year will be announced on January 28. Analysts forecast the last quarter at 10 cents a share, 25% better than the 8 cents of the fourth quarter in 2008.

Revenues will be down in 2009 but not by much. Analysts see a total of $38.2 million, down 5.1% from the $40.37 million of 2008. Next year, they're looking for a rebound to $43.19 million, an increase of 12.7%. Sales were global in 2008 with the U.S. representing 36%, Asia 28%, Europe, Middle East and Africa 36%. While royalties are a small part of the business ($3.7 million in 2009), they are an important part of profitability since they have 100% profit margins. With many of its customers ready to ship new products (think Droid and NexusOne), royalty income should add meaningfully going forward.

One area of growth is the market for cellular phones in emerging countries. Many consumers in developing countries don't have land lines. They have a cell phone for all their communication. CEVA makes many of the components in those cellular devices. In the more developed economies, demand for more features such as music playback, video streaming and mapping, functions that go well beyond communication, is rising. A good example of this is the iPhone from Apple, with more applications than anyone could have guessed only 2 years ago. Consumers want all the bells and whistles of the iPhone, and CEVA makes the chips that run those apps.

CEVA supplies chips to manufacturers of cell phones, notebooks and other mobile devices. These manufacturers are always looking to differentiate their products with better performance or more applications. With CEVA's ability to quickly cusomize chips due to its software based designs, it can deliver new chip designs at a better cost and faster than its competitors. Furthermore, it can adapt or upgrade chips almost instantly thanks to its software based approach.

The stock has seen its ups and downs. It went public in May 19, 2000 at $12.50, ran to $55 by late that year, then spent the next 2 years going almost straight south, finally bottoming at $1.60 a share in 2002. By the end of 2003, it had reached $10.50, then early in 2004, it peaked again at $12.60 and has traded between $5 and $13.50 since, with most stock trading hands between $5 and $8 a share. It seems to be breaking out of that trading range now and has been on a steady upward path since it hit a 52-week low of $5.10 in March of 2009. In December, it touched $13.06 before pulling back to its current level.

More numbers: Price to sales ratio is 6.42. Price to book ratio is 1.86. Book value per share is $6.65. Operating margin for the last 12 months was 10.40% while Profit margin was 16.7%. Return on equity was 5.01%. There's $91.78 million in cash or $4.60 per share. There are 19.94 million shares outstanding with a float of 16.12 million. Insiders own 7.5% of them. Institutions have 76.90%. There is no dividend. There is no debt.

Aggressive investors should find this company interesting and worthy of more time. It has many elements of a successful small company that looks to be in the right place at the right time.

- Company Web site: www.ceva-dsp.com

 Ted Allrich