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May 16, 2005 Stock Pick: Zarlink Semiconductor Inc. (ZL)

Stock Price: $1.55

Zarlink Semiconductor Inc. delivers semiconductor solutions that drive the capabilities of voice, enterprise, broadband and wireless communications. The company has solutions for both legacy and advanced technologies such as VoIP switching.

Zarlink Semiconductor's equipment has begun to be included into VoIP and WiMAX solutions. WiMAX and VoIP are the future of voice, video, and data services.

The CEO plans to cut the company's work force by 15% and halt certain research and development programs. $20 million in annual savings are expected to result.

Analysts surveyed by Thomson First Call expect the company to post a loss of 3 cents per share for the fourth quarter. Fourth quarter and year end results are due out Wednesday, May 18th after the bell.

We believe most of the bad news is already priced into ZL. ZL just bounced off of its 52-week low in late April and has now begun to hold at its current level. The 52-week high on ZL is $4.47.

Analyst Greg Reid from Wellington West recently upgraded ZL to a buy with a $2.40 target.

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