Earnings preview – MSFT, VSEA, SYNA, RACK, WDC

 

Sorry this is kinda late in the day. I had some personal things to take care of so I've been out. That also means this will be somewhat brief and more touchy feely than usual, if you can believe that.

 

Microsoft (MSFT)

Why is this stock so strong? Because Intel didn't blow up?

Expect Microsoft to be dogged somewhat on the call. Expect questions about the sustainability of xbox momentum ex-Haloesque titles – platform sales have been slowing in particular for Microsoft as Nintendo and Sony gobble up share around their early lead.

Do you have to Yahoo, guys? Really?

Will Vista ever work right?

I was long this till I read my piece. Funny.

 

Varian Semiconductor (VSEA), KLA Tencor (KLAC)

Lots of memory. Lam is up $2 on terrible numbers so we're temporarily in look-through mode. Uninvestable for the time being.

 

Synaptics (SYNA)

Notebooks okay… maybe even good based on volumes. iPod was probably a disaster in the quarter but will start to grow again. Further traction in smartphone touchscreens a positive. I'm long from $26ish and I sold half 5 minutes ago at $33.18 – blind on the quarter. I have no edge, I bought it on a value dislocation after their blow-up.

 

Rackable Systems (RACK)

Canacord Adams said they made #s and had enough detail on specific product traction that I would assume he knows something. Dot com spend still robust. Price competition still rough. Think they guided very conservatively last quarter and this was a beat and raise company for a long time – maybe it can be again. Long it from $8ish and staying with it.

 

Western Digital (WDC)

Better than Seagate. Margins will be stronger. Seagate said they didn't trash pricing at end of quarter – I think they lied. I don't think WDC had to stuff in the same way to make numbers. That said, hard drive channel inventories are running above historical norms and they should probably take the bar down. If they don't and it rallies, I'm a seller. I generally have been positive on this stock in the mid to high 20s and negative in the mid 30s. If anything, the story has deteriorated. It's still cheap if you believe the earnings estimates. I'm starting to lose faith.