Your email address:


Powered by FeedBlitz

Or add to your news reader: Add to My Yahoo! Add to Google

Wednesday, April 8, 2009

Juniper jumps on lowered guidance

Juniper stock is rallying today, mostly because they managed to keep SG&A down and therefore operating margins up in the face of a significant shortfall.  This is the second time Juniper has had to lower guidance for this quarter since reporting December results.

There is intense competition in carrier class routers now that Cisco has a real product.  Price competition is significant.  Furthermore, Cisco, so much larger than Juniper, can throw in lots of perks and Juniper can’t really compete.  And therein lies the problem for Juniper as the year progresses – revenues will continue under pressure and there’s only so much fat you can cut.  If aggressively priced services becomes a normal part of the pitch, and they can, margins would deteriorate rapidly.  Services, after all, have much higher cost components than circuits, chassis and chips.

Yes, I’m short Juniper.

DRAM contract goes long-term

According to numerous Korean press reports, Hynix and Samsung have been approached about 3-6 month DRAM supply contracts at a 10-20% premium to spot prices.  This would give manufacturers much needed near-term working capital.  Conversely, however, it would lock DRAM manufacturers in at small price increases considering they believe there will be shortages in Q3.  Cash strapped Hynix has taken a couple of these deals already.  It is likely Taiwan companies would be interested also as they’re in cash trouble, too.

Micron is doing a $450 mil offering of stock and converts, likely to finance acquisition of cheap and distressed assets.  It’s probably worth exploring on extreme weakness.  Lazard has them for lunch today.

Stimuli – April 8, 2009

Prologis, a reit, issued 152 million shares at $6.60 purposed for debt restructuring.  REITs have been plugging the rally as its cheaper and more lucrative than trying to squeeze financing from banks.  I believe they’ve all rallied following their secondaries as getting the deal done increases their chances of survival significantly – many of the REITs have funding gaps that the market is helping to fill.

The Treasury is considering allowing life insurers to tap the TARP. 

Pulte Homes, a troubled homebuilder with lots of exposure in some of the hardest hit markets, announced their intention to acquire Centex, a troubled homebuilder with lots of high end exposure in some of the hardest hit markets.

Moody’s warned of likely municipal debt downgrades over the coming months as the downturn continues to weigh on the economy.

The Fed is considering offering 5 year loans via the TALF program to finance purchase of commercial mortgage backed securities.

Tuesday, April 7, 2009

Treasury plans to keep stress test results secret from investors into quarter

07-Apr-2009    12:03    RTRS      TREASURY CONSIDERING RELEASING RESULTS IN SOME AGGREGATE FORM, NOT INSTITUTION-SPECIFIC RESULTS--SOURCE
07-Apr-2009    12:02    RTRS      TREASURY STILL DISCUSSING HOW THE BANK STRESS TEST RESULTS WILL BE REVEALED--SOURCE
07-Apr-2009    12:01    RTRS      TREASURY WANTS TO DELAY ANY PUBLIC RESULTS OF COMPLETED TESTS SO AS NOT TO COMPLICATE MARKET’S REACTION TO BANKS’ Q1 EARNINGS -- SOURCE
07-Apr-2009    12:00    RTRS      U.S. TREASURY AIMING TO NOT HAVE BANK STRESS TEST RESULTS REVEALED UNTIL END OF APRIL

This seems like extremely material information to try to hide so as not to “complicate” the market’s reaction.  The stress test was supposed to trigger mandatory capital recipients if they failed to meet certain criteria.  I don’t see how they can release the results in some aggregate form unless they release the capital in an aggregate form – some sort of blanket capital injection across the board – perhaps at some extremely modest borrowing cost as they would force all to take it.

It seems grossly unfair to try to protect the banks by impairing shareholder ability to accurately assess the health of their investments when financial results are reported.  I would expect them to be challenged on this decision.  However, by revealing it via anonymous tip to Reuters, they’re basically asking for feedback – it’s not a decision yet, just something they’re considering that they think requries some opinions besides their own.

 

 

Roundup – April 7, 2009

The International Money Fund (IMF) is expected to warn that US-originated assets could deteriorate in value by another $3.1 trillion by the end of next year, up from its prior estimate of $2.2 trillion.

--

Soros says this is a bear market rally and that zombie banks will sap the energy from the economy.

2989519549_acd380b4cc

--

The NY Times posits the FDIC is beyond its mandate in providing insuring $1 trillion in PPIP toxic asset investments.

“We project no losses,” Sheila Bair, the chairwoman, told me in an interview. Zero? Really? “Our accountants have signed off on no net losses,” she said. (Well, that’s one way to stay under the borrowing cap.)

By this logic, though, the F.D.I.C. appears to have determined it can lend an unlimited amount of money to anyone so long as it believes, at least at the moment, that it won’t lose any money.

Uhm.  Aren’t these the same assets that were going to get written down and collapse the financial system if we didn’t find a place to hide them?

The only financial institution more undercapitalized than banks is the FDIC.

--

Vornado warned of a rough couple of years ahead for the company and the CMBS market at large in their letter to shareholders.

--

Digitimes reports foundry utilization rose double digits in March and could rise from the high 40s to 70% for the second quarter.

TSMC, UMC: Revenue M/M estimate for March

--

DRAM contract prices for the first half of April will be flattish due to high customer inventory levels.  Most producers have recently begun predicting shortages beginning in Q3.  NAND prices were up high single to low double digits for most MLC configurations.

--

The iPhone has an iffy debut in Taiwan, falling slightly short of initial sales projections.  Taiwan’s shoddy start may foreshadow a rocky road ahead for the iPhone in China.  Apple is producing an awful lot of these for China Unicom – build for the quarter is in the ~8 mil unit range… well above current consumption rates.

Forbes discusses (barely) Apple’s speculated forthcoming TV/gaming/web tablet.

--

According to slashgear, Research In Motion and Verizon are preparing for a September release of the wifi-equipped Storm 2.

--

Intel was accused of substantial tax evasion by the nation of Denmark.

--

Monday, April 6, 2009

Avocent (AVCT) prereleases lower 1Q:2009

A little behind the curve today as I’m working on a new computer.

I did want to call attention to Avocent, a name that’s not very widely followed.  They sell “IT infrastructure management solutions and technologies”, which is to say, server tools.  They attributed the miss to lower industry server shipments – specifically from within the management systems business unit.  Takeaway here is enterprise is still weak and didn’t bounce in March.  Dell and HPQ are significant customers, as are Tech Data and Ingram Micro, the two largest IT distributors in the world.

From their 10K:

Customers

 

Our customers include our channel partners, which is a diversified group of dealers, major distributors, resellers, and direct end users who purchase our branded products.  These customers represented 67% of net sales in 2008, 65% of net sales in 2007, and 60% of net sales in 2006.  We believe that our broad range of products sold at different price points offers us the opportunity to market our products to customers of all sizes, in different industries, and with varying degrees of technical sophistication.

 

Sales to OEM customers represented 33% of net sales in 2008, 35% of net sales in 2007, and 40% of net sales in 2006. The declining trend in percentage of sales in recent years is due in part to the change in the mix of our business as a result of our acquisitions.  While we have agreements with many of our OEM customers, these agreements are generally cancellable at the will of the OEM (generally subject to notice provisions), and none of our OEM customers is obligated to purchase products from us except pursuant to binding purchase orders or licensing agreements.  Consequently, any OEM customer could cease doing business with us at any time.  Although we are not substantially dependent on any one OEM customer, the loss of, or material decline in orders from, certain of our current OEM customers would have a material adverse effect on our business, financial condition, results of operations, and cash flow.

 

The following table identifies our customers that exceeded 10% of our net sales for the years 2008, 2007, and 2006:

 

 

 

Percentage of Net Sales for the Year Ended

 

 

 

December 31, 2008

 

December 31, 2007

 

December 31, 2006

 

Dell

 

11

%

13

%

14

%

Hewlett-Packard

 

<10

%

12

%

14

%

Ingram Micro

 

13

%

<10

%

<10

%

Tech Data

 

<10

%

11

%

12

%

 

Sales to these customers are reported primarily through our Management Systems business unit, but also through our LANDesk business unit.  No other customer accounted for more than 10% of our net sales in 2008, 2007, or 2006.

Blog Archive