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Friday, March 7, 2008

Thornburg (TMA) going down for third and final time

Thornburg on the tape saying they miscalculated their asset values and need to take a 420mm impairment charge. They will be in default of everything now and their financial statements are incorrect. They got 1.77 bil of margin calls and made 1.1 bil of them. There's a standstill with 4 lenders till close of business today.

Bankruptcy by Monday morning?

SOX diverging from rest of indexes

I've become uncomfortable with the short side here as I sense a lot of forced selling. Forced selling isn't rational - it's a preservation instinct. It disregards price to achieve liquidity. It's emotional. Those sales are not motivated by profit, they're motivated by loss. I don't want to be in that crowd -- I'd rather take the other side.

I freely admit that business is slower and that we're in for lower growth going forward... but I also think earnings need to decline dramatically to justify the current prices and the deceleration is going to be a slower process than the velocity of the current downtrend would indicate.

Just an observation. The SOX has been outperforming both the NDX and the SPX for the last several days. Maybe tech is getting washed out. Maybe.

Use strength from NSM to put TXN back out

I still want to be short TXN so using a competitor's stronger stock price wake is a good way to leg back into it. I'm a seller above $30.

Marvell (MRVL) chart

Marvell (MRVL) 4Q:2008 Results

They beat consensus of 785 mil by nearly 60 mil and non-gaap earnings were 6 cents better than consensus. Revenue guidance was also a little bit better with an unexpectedly large ramp in opex planned, offsetting what would otherwise be perceived as great news. The stock is down a dollar pre-market. I think that's dumb. The hard drive vendors are all doing and guiding well and they are the primary customers for Marvell.

The stock is a buy here at $10.70. I can see it $15-16 if the panic settles down.

National Semiconductor (NSM) 3Q:2008 Results

Nat Semi hits numbers, guides a little bit worse but not as bad as the fears apparently, as the stock shoots up a dollar in the pre-market. Bookings were below normal seasonality but normalizing, according to the company. They'll need to do a lot of turns business in the quarter to get to the 440-460 mil they guided to. Nat Semi is performing well. Gross margins are near record highs and business seems to falter in less dramatic increments than it has in the past. They're a smoother ride. I don't really have an opinion on the stock one way or the other. It's cheapish. The revenue guidance is likely too high for next quarter. A mixed bag.

Feels terrible, doesn't it?

Unemployment a little worse. Tell me about it.

Yesterday I spent all day calling headhunters, tapping personal contacts, trying to find a job. One friend I spoke with told me she knew 3 other people looking for work as a technology analyst. I talked to a salesman at a tier 1 firm who told me he has MBAs begging for unpaid internships so they can have something besides a blank on their resume. I wailed to a noted short-seller friend of mine that a guy like me with an affinity and inclination towards the short side should not have trouble finding a job in a declining market. I'm so frustrated.

Recessions led by financial problems feel particularly bad to those of us in the financial business -- it's so close to home, we read about it every day, the body count stacks up around our feet. The trouble flashes across our screens and every stab down in the futures is a painful reminder that things are not well in our world.

I've been hearing some frighteningly bad performance statistics for some major funds. I was out with some hedge funders the other night and one was talking about his friend at another multi-billion dollar fund that calls constantly, begging for shorts.

I'm right here, damn it.

Thursday, March 6, 2008

Apple (AAPL) summary

Ok, so what'd we get.

The iPhone software development kit (SDK) will be available in beta immediately. The iPhone will get enterprise connectivity via Microsoft Exchange (push email, contacts, calendar) and network security in June, commensurate with the iPhone 2.0 release. The software platform shift from 1.xx to 2.0 makes me think we'll be getting 3G phones in June also but I'm reading between lines there. It might be September.

They showed an application store and a pricing plan for developers -- 70% of the revenue goes to the developer. There's a $99 fee to submit programs. Anyone can download the development kit.

The games looked pretty cool -- the motion sensing technology in the iPhone lets it be used in 3 dimensions like a wii controller -- tilting the phone causes motion in the game. Nice. I think Immersion (IMMR) has a chip designed in the phone. I'm curious how much space these games take up as most iPhones only have an unexpandable 8 gigs of memory to hold pictures, music, calendar, contacts, email and now applications.

The stock sets up to be bought sometime in the June quarter but the possibility of disappointment in the March quarter keeps me sidelined. I think its still likely to bleed between now and results.

Cover RIMM when the gap closes?

This event was expected. I don't know that it cracks the enterprise wide open. It makes it accessible. You still have to use that goofy keyboard. It's definitely a step in the right direction. Throw in 3G and we're talking.

RIMM looks silly cheap down here. I want to cover at 98.7 -- it's a long below there. RIMM still has a strangle-hold on the corporate email market.

Apple enterprise push

They're saying they have push email, push calendar, push contacts, global address lists, Cisco VPN, 802.1x security and remote wipe abilities. It will have ActiveSync and Exchange support.

Not good for RIM at all.

Apple details emerging

So far Apple showed a slide that says they have 28% of the US smartphone market and RIM has 41%. The last time they showed that slide, it was 19.5% AAPL 39% RIM. They're gaining a lot of share in the US.

Apple (AAPL) software event today

Gizmodo will be blogging the event live at 1pm EST and the live blog can be accessed at

Thornburg (TMA) gets margin call

They missed a payment to JP Morgan, who called them on default of a $320 mil loan. The stock is cut in half again. TMA's portfolio is mostly jumbo mortgages. Last week they said they'd have to sell parts of the portfolio to cover margin calls. As there's limited liquidity in mortgages, clearly they weren't able to do much. The stock... and the mortgage market... is in a death spiral.

Intel confirms NAND writedown

Yesterday, Intel's CFO confirmed they'll take a big NAND writedown this quarter. She also said they're selling twice as many bits for less than half the price sequentially -- prices have dropped over 50% q/q. She said they're too dependent on one customer -- she didn't name 'em but it's Apple. That's what I figured.

Micron's NAND results won't be pretty either.

Though pricing sounds horrific, I would think some of this has to do with mix and dependence on the iPod. I wouldn't draw a conclusion that Intel's pricing is indicative of Sandisk's market. Sandisk is more dependent on retail pricing. Apple's weakness actually helps their back-assed P&L because the overall market is softer and they buy parts for repackaging into cards cheaper. Retail pricing sucks too, though, so stay away from Sandisk.

Wednesday, March 5, 2008

iPhone heading for the enterprise?

I don't know how successful this software developers kit will wind up being. I'm discouraged that Jobs keeps saying flash player sucks while iPhone users keep begging for a flash player. Like it or not, Jobs, flash has become an internet operating system standard... and its an opportunity to distinguish your phone from the rest of the pack. Flash mobility is rare and could be a breakout application to sell into that webby cult of artistes you call the Mac base. Unless you've got some other way to port flash to the iPhone, you're making a big mistake denying it to the base. If it's too big and slow, that's fine, let the end user make that decision. Wow, I feel ironically like I'm hurling stones at a tyrant with this Jobs ranting.

The iPhone does document rendering beautifully -- you really see the page just as it is. Unfortunately, the 8x11 paper standard makes everything look so tiny and far away on the iPhone screen that you have to spend 10 minutes squishing and unsquishing the document to get it to fit the screen just so. Fun at first, annoying as hell shortly thereafter.

I tried many times to defect from the Blackberry -- first to the Motorola Q (sad, I know) and then to the Treo. Neither of them worked very well or kicked the emails through instantaneously like the Blackberry does. I always had to go back. The iPhone push email through Yahoo was real push email. And it worked really well. I imagine they're going to have bridges to corporate email in the future. They've said they're going to have some enterprise solutions tomorrow.

I think RIMM could see a little near-term turbulence going into the Apple meeting. I'm likely to suggest buying the stock on weakness but I'll wait to see what Apple actually announces. No hurry.

On an almost related note, my wife is at the Apple store right now for her 9:50 Genius Bar appointment to have her iPhone repaired. The top half of the screen is completely dead to the touch.

Compal about as expected

Admittedly, Compal is outside of my sphere of investment vehicles, but I like to pay attention to them and Quanta as the two of them together make up roughly 60% of the global contract PC market.

Quarterly results were better on the top line -- revenues exceeded expectations and notebooks beat expectations. Compal sees notebooks down 5-7% for next quarter and up 10% for the following quarter. Generally, I think visibility at contract manufacturers isn't discernable past the next 3 months, particularly with all this economic uncertainty around. Notebooks, the only growth part of PCs, are pausing... which they should do seasonally. It's hard to draw more from it than that.

Tuesday, March 4, 2008

Micron (MU) has the other half of those NAND problems

Since Micron is the co-owner of the NAND joint venture with Intel, expect them to have a bit of nastiness in their results, too. It looks like Intel must've taken a significant write-off in NAND. I'm still trying to get some clarification.

Listening to TXN...

They're sticking to the we're invulnerable to the economy line. He's not going to say anything that's going to kill the stock today... in fact, he sounds cocky and confident like usual.

I still think business is weaker than the company knows but you could see the stock level out here. Short-term, you have to take the short off.

Some prices that look good to me

Prices that look good:

GOOG $440
NVDA $20.30
STX $22.05
SIGM $25.35
EMC $15.2
SYNA $25.65
PHTN $10.05
BRCM $18.70
ALTR $17.05

Prices that don't look great but stocks that will outperform:

IBM $113.3
AMAT $19.8

Bounce coming

Hard to put it into words.

I think we're going to get a ferocious rip higher in tech in the next couple of days.

Some of these prices are going to draw buyers.

I'd be covering shorts here.

WFR a bad long trade today

So much for that idea.

Fechtor Detwiler on 3G iPhone builds

Fechtor Detwiler on the iPhone 3G build plan:

Two weeks ago contacts indicated that Apple's (AAPL) 3G iPhone
production would commence in May with at least 750K units scheduled to
be built in Q2. We now hear that the build schedule is much more
aggressive than initial indications with over 3MM units now planned
for June Q production. A couple of design changes include a power
management unit supplied by Infineon (IFX - supplied by NXP on current
iPhone) and a flexible PCB supplied by Sumitomo (was Fujikora).

Apple has to ship 10mm of these this year to hit their estimates. These numbers aren't all that surprising.

Why is Intel so weak in NAND? Because of Apple.

Intel's NAND JV with Micron, IM Flash, has been extremely reliant on Apple -- I think as much as 50% of the JV's output has gone there. The massive reduction in Apple's iPod forecast is affecting them... it's unclear whether this is incremental weakness as Apple's problems became apparent after Intel had already given guidance. It certainly doesn't signify any kind of iPod bounce.

Speaking of Apple, they're rolling the developers' kit today for the iPhone. I'm interested to see how much freedom they give to developers to actually tap into the robust hardware platform of the iPhone.

[Correction, 12:05am, 3/5/08 -- They did not roll the developers kit today. They're having a "software event" on Thursday to do that. They had their analyst meeting today. I'll probably do a piece on it tomorrow... er... later today if time permits.]

Intel (INTC) again

Intel (INTC) tells us nothing we don't know -- NAND pricing is bad and it hurts profits. There are companies in Asia that are printing negative gross margins because of NAND pricing. The rest of their business outlook was unchanged and that's the more important element -- business hasn't deteriorated significantly for them this quarter. Citi also says notebooks remain "surprisingly strong."

This stock isn't going to run away any time soon. The foreseeable growth rate is still far below what the P/E is telling you -- this company does not have a 14% compound annual growth rate. You have to give it a slight premium for its monopolistic tendencies. I'd put fair value at $15 and the range at $12 - $20.

What I worry about with Intel is they're going to do acquisitions. They have 15 billion in cash and no growth. That's what they should do. That's all they can do.

Texas Instruments (TXN) may be seeing it

Citi is saying field checks in Asia revealed a lack of bounce post Chinese New Year for Texas Instruments (TXN) in China. Substrate vendors are seeing declining orders from the company. Their President and CEO speaks at 11:45am at Morgan Stanley. Here's the link. Numbers are going to come down for Texas Instruments, its a matter of when.

WFR a long trade today

Briefing reports poly spot prices shot up 10%. All the solar companies continue to blow out numbers, Trina Solar (TSL), for example, guided much higher last night.

I'd expect MEMC Electronic Materials (WFR) to trade better today. It's marked down slightly pre-open, probably because its a semiconductor supplier and Intel guided lower last night.

Monday, March 3, 2008

Intel (INTC) lowers 1Q:2008 gross margin forecast

Guess what? NAND prices still suck. Intel lowers gross margin guidance due to NAND pricing. They have to be really bad to be hurting Intel that much since they're not a big chunk of business. Still hating Sandisk and memory capex plays here.

Texas Instruments (TXN) should be sold

Tomorrow morning TXN speaks at the Morgan Stanley conference. As I said when they reported, Texan is vulnerable to their distributor model visibility – as they sell to customers who sell to OEMs who sell to carriers who sell to end users, they typically see their cycle through a rear-view mirror and are the last to know when business has hit a wall.

They're going to speak tomorrow. They're sure going to get asked about business. I don't see how the handset market isn't going to back up on them – a number of other suppliers and OEMs in the handset market have seen it. The mid-quarter update is scheduled for March 10th and I could see them pre-announcing. The question is not if I see it but if they do… yet.

Jabil Circuits (JBL) sees weakness

This isn't current as it came out Thursday afternoon, but its worth visiting.

Jabil, speaking at the Goldman conference, indicated they were seeing a gradual stall in business, similar to the recession of '91. Things have been getting progressively slower. Display business is doing very well, but things are eroding. It's not fall of a cliff weakness like 2001, but their internal forecasts have been dropping. The company has been indicating weakness in telecom/networking for a couple of quarters now. Their customers in telecom/networking are Ericsson, Cisco, Hewlett Packard, Alcatel Lucent, Tellabs and 3Com. Obviously, these comments have contributed to the economic slowdown fears rampant in tech.

I like to pay attention to what contract manufacturers tell you about business as they're the core of the tech build (Asia tends to be a better source of this type of information as the data is more frequent and less guarded). I don't like to invest in them. I think they're glorified sweat shop, cost plus businesses that compete with less regulated overseas competitors. Furthermore, they're all big rollups. A few years ago they started buying manufacturing divisions from other companies to guarantee themselves business and to keep revenues growing. I just can't get excited about the billion dollars of business they buy from a company in exchange for a billion dollars of debt they take on. There's no shareholder value added there and I think its almost impossible to really assess the organic growth. Ultimately these wind up being unwieldy cycle bets – they're so diversified you don't get any pure play on anything, just a hodge-podge of companies and products. It's like a swap meet index – you're buying what other companies sold to the contract manufacturer. Inherently these are less attractive businesses.

Thornburg Mortgage (TMA) gets margin calls

They're all out of liquidity at Thornburg and will need to sell portfolio securities (outstanding jumbo mortgages) to fund their obligations. They'll have to sell illiquid securities to get liquidity. That's interesting. Good luck with that.

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