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Wednesday, January 7, 2009

Tech Roundup – January 7, 2009

Taiwan did an emergency interest rate cut of 50 bps following export data showing a 42% decline. Exports to China including Hong Kong were down 54%. Electronics shipments were down 43% y/y in December, their worst fall on record.

China officially awarded 3G licenses to China Mobile for TD-SCDMA, China Telecom for CDMA2000 and China Unicom for WCDMA. All three fell on profit taking.

Satyam's CEO resigned, confessing to fraud that has inflated reported profits for several years. "What started as a marginal gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years. It has attained unmanageable proportions", disclosed the now former chairman B. Ramalinga Raju in a letter to the board of directors. Last month, Satyam shares were pummeled when the Chairman tried to acquire family-owned businesses in utterly unrelated industries with company shares. This was an effort to bury the fraud according to Ragu's letter.
There's more pummeling ahead – the stock was off 80% during regular session trading in India. Satyam has been dubbed "India's Enron" in a dozen reports so far this morning. As Enron created widespread nervousness about truth in corporate reporting, Satyam's competitors may find themselves losing business to IBM as their long-standing reputation as a pillar of industry will attract nervous customers in need of services.

Memory price increases spread to NAND flash. Contract pricing for the first half of January was revealed to be significantly higher than the prior month yet still below spot prices in most cases. MLC contract prices rose 15-20% in 8gb and 16gb. NAND spot continued its ascent with 8gb rising 20%, 16gb up 6% and 32gb up 4%. (prices are somewhat rounded and quotes vary as the spread is wide and the market disparate). A 1 year chart of MLC 8gb NAND spot prices is above to give some perspective. DRAM spot prices were also up in the mid to high single digits overnight.

UBS upgrades Micron buy from neutral on expectations that lower DRAM output across the industry will drive further price stability despite government bailout capital keeping underperforming capacity alive.

The rally in memory stocks reflects anticipated order recovery and higher speculative spot prices. It remains to be seen whether companies can raise prices without demand following. Sandisk (SNDK) looks like its going to $13.80. Micron (MU) may have room up to $5 but I will be making sales today anyway.

Baidu, Google and 17 other websites apologized to the Chinese people for failing to block pornography more effectively, the Xinhua news agency reported. The Ministry of Public Safety recently launched an investigation. The WSJ also ran a story about Baidu's shill search results and its likely longer-term effects on the credibility of the company as an information portal and an advertising partner. Baidu's share of the Chinese market is unsustainable at ~63% and vulnerable to market share losses. Baidu likely has substantially more downside.

Apple (AAPL) continues to trade lower as others were as bored as I was with their product rollouts at Macworld. Furthermore, the media continues to speculate on Jobs' health. Hormone imbalances can be caused by a wide variety of factors. Yesterday the LA Times pointed out cancer is one of those factors. The stock continues to act very doggy. Rising NAND prices are negative cost input for Apple's Nano should the hikes stick.


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