There are some nasty numbers in this article for the month of January. Maverick down 7%, North Sound down 14.7% (yikes). I don't think this is the rule, these are the exceptions... but none of my hedge fund friends seem to be having a great time of it right now.
Friday, February 8, 2008
Corning (GLW) reaffirms forecast
Corning reaffirms their forecast every time they're going to speak at a conference or industry event. Most companies just tell you when something has changed, they tell you that they're the same. It's noisy and creates unnecessary moves in the stock. I wish they'd stop doing it.
Trends are good in the flat panel business and I think it will prove to be a banner year. That said, the consumer is on strike. My wife says not spending is the new black.
Fiber will see some increased margin due to Corning's innovative bendable fiber -- perhaps the only way to roll out fiber throughout metropolitan apartment buildings.
There's nothing to do here, though. Just tune out the boy who cried in line.
Thursday, February 7, 2008
Photon Dynamics (PHTN) 1Q:08 Results
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 2/7/2008 PHTN 16.7 (8.6) (0.32) (4.6) 24.9 49.20% (2.7) (0.11) 0.3 108.2 (8.2) (0.20) 1,401.1 23,775.5 1,229.3 2.12 1,763.0 From the press release: That's significantly better than the street has modeled. I think digital TVs have a forced upgrade cycle because of the FCC mandate that analog broadcasts will cease next year. This company has spent a couple of years realigning costs to better position themselves for an upturn in the flat panel display industry and it seems like they'll finally get paid. As a bonus you get the Salvador Imaging business, which could be very successful if they execute. The stock is underfollowed by the street, most analysts having lost interest by now. This stock is cheap, trading at 1.2 * book value. That, coupled with the increasing business momentum (they're guiding next quarter up 100%, people) and you've probably got a $15 stock in a few months.
Commenting on the results for the quarter, Jeffrey Hawthorne, Photon
Dynamics' president and chief executive officer, said, "The drop in revenue
for the December quarter reflects the adverse conditions of the flat panel
display market in the first half of calendar 2007. In fiscal 2008, the
outlook in the flat panel display market is improving: Panel demand continues
to be strong, panel pricing has firmed, and customers are responding by adding
capacity as evidenced by our record bookings for the quarter."
Hawthorne continued, "Against the backdrop of an improving flat panel
display market, we continue to execute on our three key strategic initiatives
designed to enhance the competitiveness of our FPD business, drive to
sustainable profitability and engage in diversified new business development.
Our bookings in the quarter reflect our competitive strength. The recent
outsourcing agreement with UCT is a critical element of our move to
sustainable profitability and we are executing on our new growth business
initiative with key contract wins in the imaging system business. We are
making good progress and will continue to focus on executing in these areas."
Company Projections for Fiscal Year 2008 Second Quarter
>
The Company estimates revenue for the second quarter of fiscal 2008 to be
between $36.0 and $38.0 million, with a loss per share of $0.11 and $0.05.
Micron says inventories low, prices rising
At their analyst conference today, Micron indicated inventories in NAND are at 2 weeks and inventory in DRAM are at 3 weeks. They said inventories can't go much lower. They also said recent contract negotiations with PC manufacturers have gone well and they were able to raise prices.
Stock is bid up a bit. It probably has more room.
DRAM contract headed higher?
Scuttlebutt tells me you could see a double digit spike in DRAM contract prices. That will be interpreted positively for Micron. Much as I don't want to admit it, their outlook will be somewhat brighter than the stock price is telegraphing. It feels just wrong to say you should buy a PC component maker into seasonal weakness where the only reason prices are going up is the business is so painful the competition has resorted to massive capital spending cutbacks to survive.
As I stated in a piece yesterday, Micron will have a good story to tell in CMOS sensors (Nokia design wins) and they get some accounting benefit from the IM Flash division (the Lexar/Intel NAND business). Maybe it's worth a shot on the long side. Maybe a double digit hike in contract prices will look like a little sunshine coming their way.
Capitulate, damn it.
I was hoping to see a much bigger decline pre-opening than down 1.5% in the NDX future. Bottoms are formed of despair. So far, I don't see it. I see an almost reluctant decline. We need hardcore selling.
Rackable Systems (RACK) 4Q:07 Results
Somehow it seems inconsequential to discuss anything but Cisco but I'll try anyway.
Rackable put up a great quarter, trouncing consensus expectations by 13 cents on a non-GAAP basis due to stronger than expected margins. Then guidance came down 10% versus the street for 2008.
This is a company that had a history of trying to set the bar low and beating the crap out of estimates. Honestly, it feels like that's the set-up they're going for once again. The CFO announced his intention to resign, the stock is below book. Why not trash the consensus and give themselves a no-stretch target?
I like this stock at $8.
Wednesday, February 6, 2008
Cisco (CSCO) Q2:08 Results
Cisco declares customers are cautious and guides revenues up 10% y/y for Q3, which equates to about $9.75 bil -- the street is at $10.2 bil for that quarter. Q4 guidance doesn't even make it to the table -- they won't even guess. They reiterate a long-term revenue growth target of 12-17%, which frankly feels like a downtick from last quarter when I heard other analysts extrapolating a higher low-end of their range based on the strength in their business.
Book to bill came in at roughly 1.00 which is also a downtick. The economic weakness is becoming very apparent. I expect we'll hear about how business got much weaker entering January, echoing the comments of a number of other companies.
Cisco is a technology pivot like Intel. The decline in tech coincides with Cisco's last quarterly report, almost to the day -- November 8th was the post-report trading date. The Philadelphia Semiconductor Index (SOX) peaked on Nov 8th at 450, last sale: 346.9. That's a 23% decline.
As I said, Cisco is a pivot. The trend is eligible for change when they report. Ridiculous as it sounds, I think you're going to have the right ingredients for a gigantic rally after the open tomorrow morning. That doesn't mean it happens. It just means people will come in thinking the world is ending. It's an opportunity for unilateral market failure consensus. If they kill them tonight... if they open really weak tomorrow... if you see a slew of downgrades... the first prices could be the worst prices.
I come up with about 323 as the line in the sand for the SOX... and where I figure they'll open tomorrow morning.
AKAM Q4:2007 Results (2)
"Let me share some thoughts with you about 2008. When we spoke with you last fall, we guided to 25 to 30% growth for 2008. Given our strong fourth quarter, this implies a higher revenue number, so we are raising our 2008 full year revenue guidance to between 800 and $825 million, or 26 to 30% annual growth we expect our normalized net income to grow in line with or slightly faster than our revenue growth or 27 to 31% on a year-over-year basis. This implies normalized EPS in 2008 of $1.65 to $1.70, or 25 to 29% annual growth. On margins, overall we expect to see the same gross margin trend downward in 2008 as we have in the last few years, although at a slower rate, with the gross margin declines being offset by EBITDA improvements. Specifically, we expect cash gross margins to decline by roughly 2 points this year, while EBITDA margins will expand by roughly 2 points. Given the opportunities we see in this high growth market, we want to ensure that we are making the appropriate levels of investment in 2008 to drive our future performance, and we expect to continue to add resources to support our growth."
So they're saying the EBITDA margins will decline slower than gross margins, which is good. Revenue estimates will rise slightly in line w/ the beat for the quarter. They're saying the right things so far so I'd assume the stock isn't going to fall apart here.
In my opinion the risk/reward is still skewed to the downside at this level as this won't be enough to send the stock soaring through its resistance at $34. It will probably trade $32.3 (the "attraction spot" on the chart) at some point.
I like the story longer-term but this isn't the right price to buy it.
AKAM Q4:2007 Results
Company reports better revenues and better EBITDA margins than forecast, coming in 7mm better on the top line and showing 47.4% EBITDA margins. Looks ok so far. Currently trading a little under 31.
Rackable Systems (RACK): Between a Rack and a Hard Place
From the Rackable Systems most recent 10Q: Revenue from customers representing 10% or more of total revenue was as follows: Three Months Ended Nine Months Ended September 29, September 30, September 29, September 30, Customer A 29 % 28 % 31 % 31 % Customer B * 22 % 14 % 28 % Customer C 21 % * 15 % * Customer D 11 % * * * * = under 10% Two of their top 3 customers are Microsoft and Yahoo and those capex budgets have to be in stasis, though Yahoo did throw out a capex number of up 10% y/y after they reported but before Microsoft swooped in for the kill. Since the deal's been announced I'd imagine there's quite a bit of confusion internally at Yahoo and approved purchase orders will be hard to come by near-term. Stock is cheap, trading at a discount to book. They do low profile, shielded servers. Rack space is expensive and the less heat servers throw off and the smaller they get the better. Dell has recently turned up the pricing heat on them and margins have collapsed in recent quarters. I doubt anything has changed with respect to pricing being tough. I've always suspected Rackable will be acquired by Dell at some point – it'd be like a revenue buy. Dell could very easily remove a competitor and leverage their vast supply chain power to improve Rackable's profitability significantly. It's probably a buy after the quarter on the theory that it can't get a lot worse looking for them and the stock reflects a lot of risk already.
2007
2006
2007
2006
Akamai (AKAM) – Great Space, Rough Race
Expect strong revenue growth with continued pressure on gross margins due to an increasingly competitive market. Content data services of the type Akamai provides are in high demand. Internet video is unquestionably creating a good tailwind for them. I have no edge on the quarter itself. I'm a little concerned as they've been seeing a deceleration in revenue growth and a reduction in operating margin so far this year. If they hit consensus numbers for the quarter, it will be the first time in the last 3 years their year over year sales in Q4 will be slower than their year over year sales in Q3 and the first time they'll have single digit sequential growth for Q4. Revenue estimates are pegged at around $175mm for the quarter. Street consensus is looking for mid single digit revenue growth for next quarter. If you don't see beats on revenue for the current quarter and guidance, the stock is likely to get pummeled. Gross margins will be a closely watched metric as it's the trapdoor in the model right now – the street seems to be using roughly 74% as an estimate. The more important metric, or the hinge factor, is EBITDA margin, estimated at about 46.3%, which is theoretically a better gauge of their ability to monetize growth. The big issue with the stock is if they hit numbers, the company is still decelerating pretty quickly overall. I would expect that as internet video continues to pick up steam and streams, growth rates will stabilize. Until that happens this stock is risky despite their attractive positioning in the content delivery market. Here's the chart.
Looks to me like its got some kind of support at $26 an area of attraction at $32.3 and resistance at $34. Here at $31, re-reading what I wrote, it seems like there's a better shot at making money in the stock on the short side as opposed to the long side into the quarter.
Earnings Estimates Cheat Sheet – February 6-7, 2008
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 2/6/2008 AKAM 174.6 63.6 0.37 80.9 183.0 4.82% 64.9 0.38 82.8 627.8 215.9 1.29 275.4 803.9 287.7 1.65 366.8 2/6/2008 ATML 422.7 14.1 0.01 -- 411.3 -2.68% 21.3 0.04 -- 1,636.3 53.1 0.10 -- 1,750.8 154.1 0.27 -- 2/6/2008 CCI 359.8 60.4 (0.10) 204.5 362.5 0.75% 78.9 (0.07) 208.2 1,365.3 94.3 (0.64) 748.6 1,487.4 334.4 (0.23) 867.5 2/6/2008 CSCO 9,793.3 2,903.5 0.38 3,239.4 10,195.5 4.11% 3,039.8 0.39 3,400.3 40,336.5 12,009.4 1.59 12,920.7 46,162.9 13,951.6 1.81 14,739.5 2/6/2008 EDS 5,876.5 470.6 0.57 819.0 5,322.9 -9.42% 246.0 0.29 554.2 22,147.9 1,331.2 1.57 2,730.4 22,586.8 1,331.0 1.62 2,707.1 2/6/2008 FISV 1,066.8 215.8 0.71 261.1 1,256.1 17.75% 279.1 0.78 352.1 4,518.5 856.9 2.74 1,015.9 5,182.0 1,150.4 3.46 1,491.7 2/6/2008 NAPS 33.1 (5.7) (0.12) (4.0) 35.2 6.40% (5.4) (0.11) (4.0) 132.2 (21.9) (0.44) (13.0) 152.7 (16.7) (0.30) (14.8) 2/6/2008 NSIT 1,257.6 40.8 0.47 51.4 1,160.5 -7.72% 29.6 0.32 40.7 4,787.8 136.0 -- 177.6 5,008.1 162.3 1.79 206.5 2/6/2008 POWI 50.2 11.5 0.35 13.4 50.2 0.06% 11.4 0.35 13.4 188.5 41.1 1.27 49.1 223.2 53.5 1.59 61.7 2/6/2008 RACK 106.3 0.5 0.05 3.4 89.2 -16.15% (1.5) 0.01 (0.1) 347.8 (5.1) 0.05 2.2 406.1 0.5 0.19 15.5 2/6/2008 SFLY 93.8 26.7 0.65 32.2 37.4 -60.08% (5.6) (0.11) (0.7) 182.9 11.7 0.40 31.4 251.7 19.5 0.57 44.0 2/6/2008 SNWL 54.8 4.5 0.07 7.0 53.6 -2.10% 5.2 0.07 -- 198.0 19.2 0.29 22.8 226.3 26.6 0.36 29.3 2/6/2008 SSTI 105.2 3.3 0.02 -- 88.0 -16.31% (2.5) (0.01) -- 409.3 (4.5) (0.08) -- 421.1 3.7 0.05 -- 2/6/2008 TIER 28.9 0.5 (0.05) 1.3 27.6 -4.48% 0.1 (0.06) 0.9 129.6 2.0 (0.04) 4.9 149.6 9.3 0.54 12.1 2/6/2008 ULTI 41.6 6.1 0.23 8.1 42.5 1.96% 5.7 0.14 7.4 151.0 18.2 0.71 25.3 183.1 28.3 0.68 35.7 2/6/2008 WEDC 22.2 (0.4) 0.01 0.3 26.0 16.89% 0.7 0.04 1.7 110.5 4.9 0.22 8.5 124.8 7.3 0.29 -- 2/7/2008 ARW 4,321.1 193.5 0.93 214.1 4,060.3 -6.04% 183.3 0.87 196.4 15,887.1 690.2 3.25 754.5 17,185.1 774.2 3.65 839.8 2/7/2008 ATVI 1,359.9 364.4 0.80 358.2 279.6 -79.44% 0.9 0.04 3.8 2,459.8 403.3 0.96 432.9 2,594.2 408.7 1.00 426.9 2/7/2008 BBND 30.0 (9.4) (0.13) -- 33.5 11.43% (5.5) (0.08) -- 176.1 (4.1) (0.01) -- 169.2 (0.6) 0.00 -- 2/7/2008 BG 11,786.9 331.5 1.54 470.0 13,571.0 15.14% -- 1.07 390.0 42,741.9 -- 5.66 1,574.8 49,046.4 1,445.5 6.26 1,857.8 2/7/2008 BMC 440.8 122.2 0.50 -- 448.0 1.64% 116.8 0.49 -- 1,694.5 447.0 1.83 590.1 1,768.0 472.8 2.01 639.8 2/7/2008 CATT 10.0 (3.0) (0.12) (3.0) 10.8 7.50% (3.0) (0.11) (3.0) 43.3 (11.0) (0.37) (10.0) -- -- -- -- 2/7/2008 CELL 1,539.4 39.4 0.26 42.8 1,414.2 -8.13% 30.1 0.19 33.7 4,205.2 81.9 0.82 104.2 6,109.7 154.9 1.05 199.8 2/7/2008 CSTR 141.2 13.4 0.18 31.1 138.1 -2.20% 12.8 0.16 29.8 554.9 48.8 0.69 118.8 602.7 56.7 0.85 132.4 2/7/2008 ELNK 281.0 23.6 0.15 62.6 290.2 3.28% 33.8 0.21 64.0 1,217.0 4.4 (0.87) 141.5 1,066.6 141.0 1.01 207.7 2/7/2008 EMKR 49.4 (3.9) (0.07) (0.7) 56.1 13.74% (2.1) (0.04) 1.3 245.4 (3.2) (0.04) 8.6 322.2 16.2 0.33 -- 2/7/2008 EPIC 115.6 23.3 0.28 24.8 108.6 -6.06% 17.9 0.20 18.7 425.8 74.8 0.86 80.1 467.6 87.1 0.98 92.5 2/7/2008 EXPE 645.1 149.0 0.31 181.5 648.8 0.57% 113.4 0.23 146.9 2,645.2 655.2 1.23 714.7 3,014.7 700.1 1.45 820.4 2/7/2008 FALC 23.5 6.0 0.13 -- 21.4 -8.88% 3.9 0.06 -- 76.1 12.9 0.29 -- 101.4 23.4 0.35 -- 2/7/2008 ITWO 67.3 11.7 0.30 -- 63.5 -5.71% -- 0.23 -- 264.3 33.5 0.87 -- 272.4 -- 1.00 -- 2/7/2008 MFE 343.3 84.2 0.45 108.0 342.7 -0.16% 85.3 0.45 -- 1,293.3 319.6 1.74 366.5 1,428.6 360.6 1.89 416.5 2/7/2008 MKSI 169.8 15.9 0.25 29.0 173.3 2.11% 20.8 0.26 -- 766.4 111.0 1.55 144.2 739.0 102.8 1.29 140.9 2/7/2008 OMTR 41.6 3.0 0.08 7.2 47.9 15.15% 3.5 0.08 7.8 142.6 7.4 0.20 22.4 228.6 21.3 0.42 41.1 2/7/2008 OTEX 173.6 41.8 0.48 43.9 168.7 -2.82% 39.2 0.46 41.3 689.9 168.8 1.92 178.3 730.1 171.3 2.15 190.6 2/7/2008 PDFS 25.1 3.8 0.20 2.0 25.6 1.95% 3.7 0.14 -- 95.0 11.7 0.70 7.8 112.4 20.7 0.73 17.5 2/7/2008 PHTN 16.7 (8.6) (0.32) (4.6) 24.9 49.20% (2.7) (0.11) 0.3 108.2 (8.2) (0.20) 3.3 140.3 8.4 0.59 15.7 2/7/2008 PWER 132.9 (0.7) (0.04) 5.1 133.0 0.11% 3.6 0.02 8.1 512.9 (20.9) (0.34) 0.9 560.2 25.1 0.20 45.4 2/7/2008 RNWK 155.3 (15.4) 0.01 15.2 151.7 -2.29% (19.2) (0.00) 14.7 566.0 18.2 0.28 54.3 642.3 (29.6) 0.10 64.3 2/7/2008 RTEC 33.7 1.1 0.04 -- 37.1 10.17% 2.5 0.07 -- 161.2 15.6 0.47 -- 172.6 21.6 0.54 -- 2/7/2008 SIMG 77.9 10.9 0.08 13.9 69.2 -11.15% 7.0 0.07 9.3 313.2 47.7 0.35 58.7 308.6 39.7 0.35 51.9 2/7/2008 TKLC 114.9 15.1 0.18 -- 103.2 -10.22% 11.0 0.14 -- 432.6 55.4 0.63 67.3 451.9 63.7 0.70 69.8 2/7/2008 TUNE 22.0 0.4 0.03 -- 24.0 9.06% 1.3 0.04 -- 90.4 5.8 0.18 -- 113.8 12.8 0.28 -- 2/7/2008 XXIA 45.1 5.8 0.09 -- 45.6 1.11% 6.1 0.09 -- 172.8 19.3 0.30 31.9 195.1 32.6 0.42 54.7
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