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Friday, January 9, 2009

Tech Roundup – January 9, 2009

Taiwan Semiconductor (TSM) released December sales – they were down 54.8% y/y. Directionally not surprising but the severity of the contraction in the Asian supply chain is profound. UMC had similarly bad sales trends to report the prior evening – down 45.5%.

Memory prices were basically flat last night. Avian made a call yesterday afternoon negative on memory stocks, saying there were no indications that demand was improving despite the spot market rallies.

LG Display's (LPL) CEO told a crowd of reporters at CES that LCD performance and price outlook is improving. "It seems like consumers are slowly recovering from the initial shock from the economic downturn. Some suppliers are experiencing a shortage of TV panels," he said. This echoes DisplaySearch's comments late last week and is not new information.
Sony indicated better LCD sales than expectations. Hitachi said their LCD sales were worse and they'll miss their target but they're a bit player in the market.
Panasonic said they will slash spending on flat panel television manufacture by 1.5 billion (down 23%) but still intends to sell 15.5 million (up 50%) sets this year.
Tokyo Electron announced orders were down 65% in the December quarter. Semi orders dropped 55% -- solar and flat panel orders were down an astounding 98%.

PALM rocketed 35% yesterday after showing its newest phone running on its new Linux-based operating system. With a retractable qwerty keyboard, a full browser, and a multi-touch screen, Palm has a credible offering to fend off obscurity. The phone will not ship until later this year.

While Palm's phone looks great, its likely to be expensive to manufacture for Palm – note that neither RIM nor Apple ships a phone with a touchscreen AND a keyboard. The Pre's bill of materials is likely to be the highest in the cell phone industry. Palm has significantly smaller scale and resources and will not get the same kind of operating leverage buying parts that Apple and Research in Motion get. Palm has not disclosed pricing but they have said they will price it competitively with the other offerings in the market – $200 is a paltry ASP relative to the bill of materials. Without revenue sharing agreements or substantial subsidies from Sprint, it is unlikely they will recoup much on the cost side. Apple was able to extract hefty fees from AT&T for exclusivity on the iPhone which ultimately led to leverage in negotiations with other carriers worldwide who were dying to latch onto Apple's hot streak. Palm, on the other hand, is a one-trick pony and this is their last chance to avoid the slaughterhouse. They will not have the same kind of negotiating leverage to extract substantial revenue from carriers in exchange for the right to sell the phone that Apple had. The rest of Palm's line looks pretty shoddy relative to the Pre and likely erodes as anticipation of the new phone builds.
Short interest in Palm shares is a dangerous 35% of the shares outstanding and the stock will probably not come in much as a result – pained short covering will prop it up on weakness. Palm stock is likely to remain volatile with an upward bias but Palm's future is anything but certain. The Pre should enjoy very brisk sales at $200 but the more important issue will be how much they're making… or losing… on each unit, and that won't be known for a while.

Ballmer indicated he was open to a deal for Yahoo's search assets – this is the first indication he has shown that he is interested in any kind of transaction with Yahoo since walking away from the company several months ago. Yahoo is sucky yet stable. Shareholders and analysts want Yahoo to do something with Microsoft. Yahoo will be forced to engage in talks with Microsoft once again – expect speculation to continue to bubble and froth in the stock. I think Yahoo is a trading buy here.

There may be a part 2 this morning. Check back before the opening.

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