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Friday, April 17, 2009

Semicaps at 2*book are less attractive ($LRCX $AMAT $KLAC)

The semicaps have had a nice move off their lows.  I had suggested buying them pretty close to the March lows… and while I still think things can improve there, the sheer valuation trade I thought would protect me is over.  At 1 – 1.5* book, the stocks are telegraphing endless woes.  At 2*book, they’re telegraphing a more normalized recovery.  I still do not think we are in a normal economic environment and I do not think the inventory rush in the channel is sustainable.  As long as utilization rates at the foundries stay strong and memory prices stay firm there’s likely no imminent danger… but at 2* book, there’s just less cushion in my mind.

I’ve taken my profits in the semicaps.

Roundup – 4/17/09 ($MU $C $GME $ERTS $NTDOY $SNE $NVDA $GLW)


DRAM prices have been strong recently.  Nice looking chart.


Citi beats “estimates” with their own accounting estimates.  Honestly, I don’t know how anyone can believe in bank earnings at all anymore.  These companies should be reporting on the old standards in addition to the new ones (but they’d never do that because it would defeat the whole purpose of changing FASB rules).

NPD data for the video game industry showed a decent decline of 17% for March.  It’s the first negative variance in several months and probably negative for the stocks (ERTS, GME, NTDOY, SNE).  In related news, GME reiterated their prior earnings guidance of 40-42 cents for the quarter – analysts have 42 cents modeled (GME typically low-balls.)  Nintendo Wii had a 15% m/m decline – this bears watching as production has increased substantially of late.

Pricing of graphics cards could come under pressure as ATI and Nvidia have simultaneous product refreshes.  Pricing is not good in the first place – as the low end graphics market picks up functionality in each revision, the high end advantage becomes less clearly seen.  Not a fan of Nvidia (NVDA) at these prices.

There was a big jump in panel shipments in March, up 28%.  Pricing remains under significant pressure according to most producers.

Google $GOOG 1Q:2009 results

Google results showed no significant change to recent trends.  Clicks were fine, costs are under tight control and they maintain their dominant position in internet search.

Away from the day to day gyration of will they or won’t they make the quarter and how much the stock will move on it, it’s worth noting that revenue dropped on a sequential basis for the first time in the company’s history.  Their top line growth rate is slowing substantially.  Analysts have this modeled as a blip – revenue will rise sequentially for the next year, according to estimates – that seems highly unlikely.

Internet search should be counter-cyclical – its a no-cost activity and lower consumer spending should have a positive and not negative effect.  Fact is, when Google says the economy is impacting them, it’s not particularly true.  Their sheer size is what is impacting them.  Google has tried to find ancillary businesses to layer on and none have caught in the ways they have hoped.  While YouTube is a pageview bonanza, it’s not a significant revenue generator.  Their efforts in social networking have been meager and mostly unsuccessful.  It is unclear where their next big wave of expansion will be.

Despite their leadership position, they are not invulnerable to multiple contraction due to their slowing growth rate.  Fact is, the only thing keeping the stock up here are the expanding margins.  It will be difficult for the company to show more gains on the expense control front without sacrificing further top line growth.

Tuesday, April 14, 2009

Intel (INTC) 1Q:2009 results

Intel reports slightly better revenues.  Gross margins, arguably the stock driver, came in better than expected at close to 46% – the street was looking for closer to 43.6%.  ASPs held flat, according to the company – in my view, they are heading permanently lower as the low end of Intel’s line is the fastest growing portion and have an ASP 80% lower than the company average.  The more netbooks succeed, the more Intel ASPs will be pressured.  Operating income came in at 670 mil, better than the ~375 mil the street was looking for.  Tax rate of 1% drove a large EPS beat but should be largely dismissed as non-operational.

Guidance of… well… they’re not giving “guidance” but they’re “planning” for a flattish 2Q.  Gross margins will likewise be flattish.  The tax rate for the full year is being guided to 24%, which likely drives some higher EPS revisions.  Expectations for revenue guidance were anywhere from flat to up 5%, with much of the recent strength in the stock attributable to a stronger supply chain build from many PC component manufacturers as inventories were cut very aggressively when the economy hit the skids in 4Q:2008.

Intel is a company without much long-term growth.  They may look cheap on a historical basis but their heady days of consumer penetration are behind them.  Internet connected devices are moving into a more mature phase of platform insensitivity – the net and the interface are the devices that matter and Intel controls neither.  The stock is likely to tread between 12 and 16 without significant end demand changes which are unlikely in the near-term.

That said, it’s very possible Intel is deliberately suggesting the revenue outlook for next quarter is bleaker than it may actually be – expect many on the call to think they are low-balling.

Goldman Sachs results are kind of tough to believe

Would Goldman Sachs deliberately manipulate results to make them cosmetically pleasing at a time when the market and administration are desperate to give people something to believe in right in front of a 5 billion dollar stock offering?


Converting to a bank holding company allowed Goldman to report December in a vacuum – a loss of over a billion dollars in write-downs.  It would seem to me the more accurate way for Goldman to have reported was for the 4 months instead of the 3 months.  I think reporting it as they have is deliberately deceptive and makes proper analysis of the quarter impossible.

I need to mention that I have a GS short on, particularly since that link is outrageously biased.  I also would disagree with the author’s allegation that Goldman Sachs is the devil, though I am certain they have banked for a number of his minions.

Digitimes provides list of iPhone suppliers

These will probably make good shorts when Apple rolls out the new iPhone in June.

Lehman Bros, not content to bomb markets, goes nuclear

Talk about toxic assets.

Big tech merger speculation abounds at ZDNet

At least in the mind of one Jason Hiner, who posits seven potential tech mergers in 2009.

They are as follows:

7. AAPL for ADBE

This story is older than dirt.

6. ORCL for CRM

I’ve heard this one before also.

5. GOOG for Skype

Doesn’t Google have enough businesses that don’t make much money?  They just did a big refresh of Google Voice and Grand Central, their full service voice offering, is still in a kind of premium beta.  Seems doubtful.

4. MSFT for PALM

Pre has great buzz.  Microsoft hasn’t attacked the phone market with more than operating systems – and they probably don’t make much doing it.  It’s certainly a market they would want to try to expand in.

3. IBM for RHT

Could happen but why hasn’t it?

2. CSCO for VMW

Let’s see how those new Cisco servers sell first.

1. DELL/EMC merge

Dell never buys hardware companies.  They sign reseller agreements (LXK, EMC) to bloat revenue and attach service contracts.  IBM would make more sense.

All in all, not that helpful an article.

Earnings Estimate Cheat Sheet – April 14 – 17, 2009

Estimated Reporting Date Symbol Revenue Estimate Current Q Operating Profit Estimate Current Q EPS Estimate Current Q EBITDA Estimate Current Q Revenue Estimate Next Q Sequential Revenue Growth Estimate, Percent Operating Profit Estimate Next Q EPS Estimate Next Q EBITDA Estimate Next Q Revenue Estimate Full Year Operating Profit Estimate Full Year EPS Estimate Full Year EBITDA Estimate Full Year Revenue Estimate Next Year Operating Profit Estimate Next Year EPS Estimate Next Year EBITDA Estimate Next Year
4/14/2009 INTC 6,982.8 366.6 0.03 1,577.1 7,050.7 0.97% 553.7 0.07 1,781.3 29,717.8 3,335.4 0.44 7,944.9 32,191.9 5,940.0 0.80 10,903.3
4/14/2009 LLTC 203.1 76.9 0.21 84.5 205.0 0.95% 79.7 0.22 83.8 967.1 415.9 1.30 438.9 895.1 368.3 1.07 406.3
4/15/2009 ADTN 109.0 21.6 0.23 23.5 117.8 8.06% 26.0 0.28 27.4 474.4 103.3 1.11 112.3 495.1 112.2 1.18 122.1
4/15/2009 INFY 1,130.7 335.7 0.54 376.2 1,135.4 0.41% 314.2 0.50 326.5 4,673.0 1,373.0 2.21 1,508.7 4,700.5 1,362.5 2.16 1,469.1
4/15/2009 PLCM 233.9 29.1 0.26 -- 240.8 2.97% 32.8 0.29 -- 976.2 137.3 1.23 -- 1,028.4 155.6 1.40 --
4/16/2009 APH 654.7 109.4 0.40 134.0 675.2 3.12% 115.5 0.43 138.5 2,722.4 472.8 1.74 563.4 2,899.8 531.1 2.01 615.7
4/16/2009 CY 123.4 (31.3) (0.23) -- 129.3 4.72% (22.4) (0.17) -- 538.8 (71.1) (0.54) -- 609.7 (13.1) (0.21) --
4/16/2009 FCS 235.1 (29.7) (0.34) (7.1) 242.7 3.23% (21.9) (0.28) (3.3) 1,006.5 (68.9) (0.91) 19.8 1,130.5 (20.6) (0.26) 126.6
4/16/2009 GOOG 4,078.5 2,016.2 4.92 2,416.0 4,158.9 1.97% 2,021.2 4.97 2,446.9 17,226.2 8,491.6 20.75 10,255.2 19,775.9 9,905.4 23.92 11,838.5
4/16/2009 JPM 23,290.7 9,898.0 0.32 -- 23,808.6 2.22% 10,495.0 0.33 -- 96,395.0 42,492.0 1.44 14,672.5 103,103.1 44,808.0 2.54 24,991.8
4/16/2009 NOK 12,706.7 797.5 0.14 1,142.6 13,375.5 5.26% 1,046.5 0.19 1,593.4 56,791.2 4,648.7 0.85 6,528.6 60,186.2 5,978.6 1.18 8,085.7
4/16/2009 UTEK 27.3 1.0 0.04 2.4 25.3 -7.34% (0.1) 0.03 0.3 114.8 6.8 0.32 13.1 131.0 11.5 0.59 19.0
4/17/2009 C 21,652.6 -- (0.34) -- 20,518.1 -5.24% -- (0.23) -- 84,373.4 -- (0.81) (3,172.1) 86,692.7 -- (0.10) 832.0
4/17/2009 GE 39,012.5 4,152.6 0.21 5,975.0 41,939.9 7.50% 4,600.6 0.24 6,350.0 166,602.3 17,118.1 1.00 28,066.2 166,609.5 16,847.0 0.96 28,001.2
4/17/2009 TTMI 148.7 7.6 0.08 13.4 146.7 -1.30% 8.4 0.10 14.3 603.9 37.8 0.44 60.7 649.7 57.1 0.68 78.4

Monday, April 13, 2009

Linkage – April 13, 2009

Yahoo and Microsoft are talking again.  Funny how that happens every time Yahoo is about to lower guidance.

Seagate guides higher commensurate with a $430 mil offering.  They also guide the following quarter higher.  Anecdotally positive for the PC industry, where restocking orders have been bolstering component demand.

Taiwan Semiconductor reported March sales ahead of their prior guidance, showing an 18.4% m/m gain, bringing the quarter in at down 39% q/q versus their guidance of down 41-44%.  Digitimes reports accelerated order trends from Altera, AMD and Nvidia are driving near-term 12 inch fab expansion.  Citi, in a buy reiteration piece, suggests capex will come in down 20-30% y/y from last year’s 1.8 bil.  Semicap companies are generally suggesting declines of 40-50% for 2009 so this would be better than the mean for the industry at large.

Genworth Financial was declined admission to the TARP party.  Goldman is allegedly going to do a secondary to get clear of TARP…unless of course they’re the next black swan.

Robert Reich writes that our economic woes aren’t almost over and says they may have barely begun.

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