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Monday, January 12, 2009

Tech Roundup – January 12, 2009

Analysts returned from CES overwhelmingly cautious on semis, particularly the ones that offered guidance stronger than the rest of the industry. Both Marvell and Nvidia were cited more than once as potentially below guidance. Not coincidentally, Marvell and Nvidia have January quarter ends – when they gave their guidance, it didn't reflect the worsening environment seen in November and December. Nvidia guided to down 5% and analysts think down 15-20% is more likely. FBR cites price cuts by AMD in graphics processors as a catalyst for further weakness. Marvell guided down 8-13% and are tracking more like down 15%. UBS downgrades STM to sell from neutral, saying they believe the company will print a loss of 41 cents for 2009 versus consensus of 18 cents of profit.
FBR's summary is the most thorough in my opinion – he's been doing very good supply chain work. He has a half a dozen negative Broadcom datapoints. Customers must cancel orders with 8 weeks notice – so a lot of customers are getting stuck with parts they don't need – guidance could be down 15% q/q. They're losing share at Nokia to CSR. They're losing share in cable modems at Motorola to Texas Instruments. Qualcomm and Texas Instruments make the OMAP processors of choice which is making it hard for Broadcom to get traction in cell phone processors. They don't expect Broadcom to be in the iPhone Nano. Despite all of this, they like Broadcom for the breadth of their portfolio and because they can deliver Ethernet over rusty barbed wire.

The Skew: Nvidia is a short until right before they report or after they guide down. Marvell is not a stock I want to short. It's worth noting that part of STM's downgrade is due to share losses at Seagate in hard drive ICs to Marvell. Broadcom seems vulnerable to further downside pressure on lowered guidance – gross margins collapsed last quarter and sound like they're going a lot lower due to all these competitive situations. I'm short some Broadcom.


Citi says Taiwan Semiconductor (TSM) is seeing rush orders from some customers. From his note:

After months of utilization slipping to 35-40% in Jan 09 (not 30-35%), we are

beginning to hear of rush orders returning to TSMC, SPIL, and ASE from nVIDIA

(one of the top 5), Qualcomm (one of top 5), Altera, and Omni Vision from very

low levels.

The Skew: I wouldn't read much into an uptick from not much to a little. There's some guidance coming in the next couple of weeks and it will be instructive to hear companies talk about the environment. I think inventory levels are really important to get a picture of how an uptick in demand would play out. I'd hold the horses on this call.


Deutsche Bank met with Brightpoint (CELL), a major handset distributor, and came away positive, saying Brightpoint is seeing much better trends than the rest of the industry due to their smartphone exposure – smartphones require more customer care and software flashing which gives Brightpoint the opportunity to capture more margin.

The Skew: The stock is definitely acting much better than anything else in distribution and a rare positive call. Chart looks pretty good… might be worth trying a small speculative trade.


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