With Mathstar (MATH) at $1.45 a share, it may be safe to play

Mathstar Inc. (MATH) hit yet another 52-week low today and is currently trading around $1.45 a share. Now that their company stock has fallen 66% in the last 6 months it got me thinking: "Mathstar, huh, why not?"

I’ll be honest, I haven’t been nice to company when I wrote: Can MathStar Inc. sell their FPOA technology or will they disappear? But there hasn’t been a real motive to write wonderful things about this company or what the stock could possibly do in the near future. Mathstar just reported Q1 07 on May 1st, revenues were $92,000, compared with $7,000 in the fourth quarter of 2006 and $8,000 reported in the same period last year. Net loss per share was $0.26 in the first quarter of 2007, compared with $0.28 per share in the fourth quarter of 2006 and $0.28 in the first quarter 2006. They spent more money on research and development with expenses increasing to $299,000 or 11% to $3.1 million, up from the $2.8 million reported in the same quarter a year ago. Not what I was hoping for nor what Wall Street wanted to hear. So with administrative expenses increasing $260,000 or 12% to $2.5 million, compared with $2.2 million in the same period a year ago, where do we go from here?

Well that would be a new 52-week low studio audience. To recap on what Mathstar does:
They have been developing an advanced type of programmable microchip for years, and has only just begun to sell its newest product to customers with the hopes of taking it mainstream. They are banking everything on a magical Field Programmable Object Array™ (FPOA) chips that operate at speeds up to 1 GHz and can be programmed to "serve a number of useful functions". They have shelled millions into developing these bad boys and are hoping their FPOA products can compete and win the Field Programmable Gate Array (FPGA) industry. They claim that FPOA’s are very different from the FPGA’s already widely available on the electronics market. MathStar says its chips have much higher data processing capability needed for data-heavy applications such as medical imaging and radar processing, at a lower price than other high-capacity programmable chips now on the market.

They spend a ton of money and who know’s if the FPOA chips will be a big seller. Doug Pihl, Mathstar‘s president and CEO had this to say last week:
"We shipped our first production FPOA’s in the first quarter. MathStar’s 1 GHz part is up to four times faster than any other programmable logic device on the market today, clearly making it the performance leader. We are encouraged by the strong interest from customers, particularly in the professional video market, for our FPOA products. MathStar recently announced an agreement with Arrow Electronics, one of the world’s largest electronics distributors, as our global supply chain partner. This partnership gives us a fully deployed global sales channel to support our customers from the design and prototyping stage to production, in the Americas, Europe and Asia Pacific."

So, the CEO is hopeful (but that’s his job) and with the stock trading so low and where it should be, this becomes an attractive speculative play. Mathstar gets next to zero coverage on Wall Street, but if they start selling their FPOA technology, that could start to change.

Frank Lara Jr.

Frank Lara Jr. can be reached at [email protected]; he does not own securities in the companies he covers.