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Cypress' Deal With Alibaba Cloud Enhances IoT Capabilities

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Cypress Semiconductor Corporation (CY - Free Report) has collaborated with Alibaba (BABA - Free Report) in order to leverage its PSoC 6 MCU product family and wireless connectivity solutions with Alibaba’s embedded Internet of Things (IoT) operating system, AliOS Things.

With this move, the IoT product developers which are using Cypress’s PSoC and wireless solutions will have direct access to Alibaba’s cloud platform. Further, it will allow these developers to leverage the power of the Chinese e-commerce giant’s design differentiated products as well.

All these initiatives will enable the developers to perform data processing safely and securely.

We believe the latest move will enhance Cypress’ IoT and cloud offerings, which is likely to attract developers, thus expanding the company’s customer base. Consequently, this will drive its top-line growth.

Coming to price performance, shares of Cypress have returned 2.9% on a year-to-date basis, against the industry’s decline of 7.7%.


Deal Rationale

The recent deal seems to be a win-win situation for both Cypress and Alibaba.

The deal is likely to strengthen the capabilities of Cypress’ embedded solutions and programmable products portfolio. The company has announced that its PSoC 6 & four MCUs have passed the basic certification for the AliOS Things.

All these factors will aid Cypress to bolster presence in the world of semiconductor as well as rapidly penetrate the growing IoT space.

On one hand, this deal will enable Alibaba to expand its customer base by allowing Cypress to integrate its cloud support and AliOS with Alibaba’s embedded solutions. Moreover, the rising number of IoT developers is likely to aid the adoption of AliOS Things.

IoT Market to Aid Growth

Reportedly, the worldwide IoT market is expected to reach $6.5 trillion by 2024 at a CAGR of 27% between 2018 and 2024.

Further, a report from IDC suggests that the global spending on IoT products and services is expected to hit $772.5 billion in 2018 from $674 billion in 2017.

Cypress is well poised to cater to the growing needs of developers in this rapidly growing market on the back of its robust product portfolio, strengthening IoT capabilities and key offerings.

Moreover, the company aims to promote the growing interest of developing IoT services and products which have gained significant importance in this fast paced world and will continue to gain traction in the long haul.

Zacks Rank & Other Stocks to Consider

Currently, Cypress sports a Zacks Rank #1 (Strong Buy).

Some other top-ranked stocks in the broader technology sector are Maxim Integrated Products (MXIM - Free Report) and Vishay Intertechnology (VSH - Free Report) . Both the stocks flaunt a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Maxim Integrated Product and Vishay Intertechnology is pegged at 11.67% and 9.16%, respectively.

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