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Tuesday, December 30, 2008

Tech rundown – December 30, 2008

Broadband – WSJ discusses cable industry lobbying for new definition of broadband speeds for tax credits and stimulus grants. The cable industry, which can easily deploy DOCSIS 3.0 equipment on their existing infrastructure, wants the definition of broadband to be 40-50 megabits per second. The telco providers of DSL not so much – they would have to do significant upgrades to compete. Cable wants to be incentivized to build out rural areas where there are fewer operators (and more opportunity to price gouge). The article suggests Clearwire (CLWR) would benefit if the government moved wireless broadband definitions over 2 megabits per second as Wimax can do 2-4 megabits per second. Prime beneficiaries of a massive broadband upgrade in cable would be Cisco (CSCO) and Arris (ARRS). Theoretically it would also benefit fiber to the home players like ADC Telecom (ADCT) as FIOS is compliant with the broadband speed ranges discussed. Another proposal in discussion is for state and municipalities to build the networks and open them up to service providers – a terrible idea, in my opinion.

India delayed their 3G bandwidth auction by 15 days apparently due to lukewarm response. Applications are now due on January 20th so get your forms in now.

FBR says distributor chip shipments fell 27% m/m in November – the 5 year historical average is down 1.5% m/m. Distributors have been cutting back shipments to poorly capitalized whitebox makers due to ability to pay concerns. TXN, MSCC and AMD saw large downward revisions due to their "sell-in" revenue recognition. NAND flash is perceived to be better positioned than DRAM due to its exposure to netbooks, smartphones and game consoles. Despite the order cuts, distributor inventories look to rise to 60 days on hand versus desired levels of 40-45 days. Nonetheless, FBR believes January will have a more historically normal sequential change (though off significantly lower levels than in years past) and that inventory replenishment could begin in the summer of 09 – a dubious conclusion as they just told you inventories are 35% higher than distributors would like presently. They like ONNN, MRVL, MSCC, SLAB, IRF, BRCM, FCS and ATML.

TSM/UMC – UDN ( reports utilization rates at TSM and UMC will drop below 50% and 30% respectively in January due to a combo of Lunar New Year days off and lousy demand.

SYNA – Thinkequity foresees the notebook touchpad market becoming more competitive as netbooks become the dominant market share driver in the market. Taiwanese notebook ODMs will report December figures next week and forecasts suggest they were down 15-20% m/m. Order cuts have been coming through the supply chain all through November and December and consequently Think says Taiwanese ODMs expect January shipments will be down 30% m/m from December's depressed levels. On top of these lowered unit volumes, Elan has been taking share in netbooks – they're in 80% of the Asustek models (the EEE PC). In PCs, netbooks are the top sellers at Amazon and Walmart. With Elan starting to get meaningful volumes and Cypress getting some design wins, Think believes there will be increased competition in notebook touchpads – previously it has been a duopoly of Synaptics and Alps. Though Synaptics has been successful in touchscreen cell phones and that market is robust, Think sees the proliferation of iPhones to Walmart as reducing Synaptics' potential gains as they're not in the iPhone (this is flimsy). The stock trades at 11* his $1.52 estimate – historically the stock has traded in a 10-25* EPS band.

AAPL – Macworld is next week. Kaufman says look for new desktop Macs and possibly updates to Apple TV and/or Time Capsule.

AMZN – Lazard says Amazon maintained market share at the expense of profit margins and reiterate their below consensus EPS expectations for the quarter. Amazon is the most expensive retailer on many valuation metrics and a hit to profit margins would not be taken well by investors.

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