Sandisk 10Q notes for 1Q:2008

There's an interesting disclosure in the 10Q that they sold 13.9 mil of previously written down inventory in the quarter.

By my reckoning, this increased product gross margins by 190 bps (from 16.4 to 18.3). It's also most of the profits for the quarter

There's continuing language in there that they probably have to finance to meet their off balance sheet fab construction commitments.

They disclosed some of their investment portfolio by category in accordance with a new standard. Unfortunately, by not giving us a comparable there's no way to determine what the change in the health of these assets has been. Last quarter, they had over a billion dollars in munis and about 350k in corporate fixed income. They're going to need cash for these fab commitments and it seems like the portfolio has been getting more illiquid – shifting to long-term, Level 2 investments – Level 2 means there's no exact market for these assets but they have a pretty good idea what they ought to be worth based on anecdotal pricing information. This winds up being a discretionary valuation call, it's not like they can hit a steady bid.

Micron (MU) at Merrill notes

At Merrill yesterday, Micron made their case for why they're going to be the low cost producer in memory. In DRAM, they're seeing "pretty robust demand" they termed seasonal or better -- the notebook business is the key strength there. Pricing in May was up in the 5-10% range. They already get a higher ASP than most of the industry due to their server and specialty DRAM business (programs where they have a design-specific win and its not a commoditized board swap every time a unit gets churned out). As a result of specialty DRAM and servers, their ASP is 50% higher than the rest of the industry.

Capital spending cutbacks in the DRAM arena have made customers concerned about supply availability in the second half. Micron is very big on discussing the supply side of the equation and often will remind investors that bit growth demand is relatively constant but its the supply side that drives their profitability. They say supply is somewhat tight right now. They believe there will be roughly 60% total memory demand growth in DRAM -- 50% bit growth plus ~8% unit growth.

Lexar, their NAND card division, continues to improve with better margins (though I think it still prints red). Lexar now procures roughly 50% of their raw NAND from Micron directly -- when they bought it a couple of years ago, Lexar was buying 95% of their product from Samsung. They're planning to roll out solid state NAND drives in the second half of the year and expect 256gb capacity by year end. Apple is getting ~$1200 for a 64gb drive presently -- are we really talking about $5000 hard drives? That's dumb.

The questions stunk. No one asked them about NAND pricing. No one asked them about channel and company inventories. Put me in, coach.

Activision (ATVI) Guitar Hero raises the roof

Activision reported gigantic numbers relative to consensus, beating their previous revenue guidance by 70%. What is the point of guidance like that anyway? Particularly impressive, they shipped no new titles in the quarter -- this was purely inherent strength in the Guitar Hero and Call of Duty franchises. They'll be closing on the Vivendi acquisition in the near future, which will add World of Warcraft to their quiver. Frankly, they'll need it as they're creating some very difficult comps for themselves next year. Guitar Hero revenue growth is driven somewhat by initial guitar controller sales -- it's likely as the franchise ages, the mix will shift more to standalone software, which will help margins next year, likely at the expense of unsustainably high revenue growth in the core business.

Analyst estimates are intellectually dishonest at this point as they rely on company guidance which is conservative to the point of silliness. There's no near-term break in the story that I see though I am skeptical of some of the line-up for next year -- Kung Fu Panda, another James Bond game, another Spiderman game, another Madagascar game -- there's no crowd pleaser in that motley crew. Another Guitar Hero update and the layering in of Blizzard's World of Warcraft series is going to have to carry the year... but that's enough to keep Activision the best software story in video games.

Nvidia (NVDA) 1Q:2009 results

Nvidia, the industry market share and technology leader in graphics cards for the PC industry, reported revenue in line with widely lowered expectations. Gross margins missed estimates by a percent due to product transition. Inventories were 10 days higher exiting the quarter vs. last quarter at 60 days. They guided for "normal seasonality" of down 5%, with notebooks to decline worse than the company average.

They rarely have normal seasonality in the July quarter. The last few years they've grown 1-4%. That said, this lowered guidance has been well disseminated prior to the report.

Nvidia's a good company. Their biggest issue is they've got such a big base it's very hard to continue to show the kind of growth they've experienced the last couple of years. The stock is fairly priced here.

NAND contract 1H May

NAND contract price is posted for 1H May. 8gb contract moved up 5-8%. Most other sizes showed small declines. Spot and contract are relatively close to parity here, with 8gb still trailing spot somewhat.

I was hoping to see more strength in contract renegotiations.

Micron presents today at Merrill Lynch's conference. Their contract price was lagging the rest of the industry. They may have seen more of an increase than the average.

The webcast is at 9am EST.

Er. Sorry bout that.

A family commitment kept me offline almost all day. I'll have more time tomorrow.

THQ Inc (THQI) 4Q:2008 results

THQI still stinks. Miss revenue guidance, lower for next quarter, losses per share far in excess of guidance and subsequently consensus. Profitless prosperity. There's a massive console cycle and they're nowhere near it. They'd really be so much better off as Disney's design house. Doing these licensed games on their own gets them none of that nifty Disney stock.

Still don't like 'em. Still prefer Activision (ATVI) and Nintendo (NTDOY) in the space.

Synchronoss (SNCR) on gap between iPhones sold and activated

We cannot share the specifics due to NDA obligations, but the gap between the number of iPhones expected to be sold and the actual number that we are activating continues to be significant, and we expect this trend to continue. As a reminder, Synchronoss is not paid on the number of iPhones that are sold, but rather the number that we activate. And as a result, we are materially adjusting our expectations as it relates to revenue related to the iPhone during 2008. To put these factors into perspective, we currently expect our related transaction revenue from the iPhone to decline by approximately $30 million in 2008 compared to 2007. We continue to expect to exit 2008 with an iPhone contribution rate that is in excess of $10 million annually.

So the question is why don't they think the 3G iPhone will reignite their sales? Because they're going to be sold unlocked and they can't predict how sticky AT&T is?

Intrigue.

Cisco (CSCO) guides 4Q:2008

The US remains cautious and emerging markets are also articulating caution going forward. Cisco says they'll continue to take share against competitors and that they almost always outgrow the economy. They guide up 9-10% y/y for 4Q, which equates to the consensus of ~10.3 (the low end of forward guidance) and 10.37 bil. They reiterate their long-term guidance of 12-17%.

Anti-climactic. But fine. The stock is trading off a bit and is only up 40 cents post-market. The stock had a pretty good run prior to the number. Cisco is still the dominant player in most of their markets and continues to maintain a magical margin structure that rarely wavers. They're going to make $1.70 next year and they've told us they're going to grow at a 14.5% midpoint in perpetuity. They're basically telling you the stock is worth $24.65, which would be 14.5* earnings... if you're a purist and you believe in basic growth stock valuation analysis, that is. Cisco typically garners a premium to that valuation.

I don't think these comments or outlook will break tech out but I've been wrong before. We'll see.

Synchronoss (SNCR) between the lines?

They're spending a lot of time de-emphasizing the growth at AT&T and talking about their other businesses, calling this a transition year, saying non-AT&T programs will be 40% of business exiting 2008. I wonder if they're suggesting their AT&T business is going to fall off a cliff. It was 72% of revenues in the current quarter. There has been speculation that the new iPhone revision 3G will be sold unlocked -- that you'll be able to use it with any carrier. That could lead to lower activation assumptions from AT&T on their part.

The stock has quickly collapsed to $17 from a close of $23 so clearly I'm not the only one reading between the lines.

Cisco (CSCO) 3Q:2008 Results

Cisco beats by ~50mm, 2 cents better on the bottom line. Operating income also beats consensus by approximately 100mm. Looks good so far. The conference call starts in 10 minutes and I'll have more then.

Synchronoss (SNCR) reports below expectations

Stephen G. Waldis, President and Chief Executive Officer of
Synchronoss, stated, "Our update for the first quarter and full year
2008 is mixed. We have materially lowered our growth expectations for
2008 due in large part to reduced revenues associated with the iPhone,
which masks the underlying growth and momentum of the rest of our
business. Our growing brand and significant long-term growth
opportunity is evidenced by the company winning more new, strategic
customer initiatives in the past quarter than any other time in the
company's eight year history. As a result of our confidence in the
direction of the company and our long-term growth opportunity, our
board of directors has approved a share repurchase program for up to
$25 million."

Not sure what that means yet but its first admission of iPhone weakness I've really seen, though the data shows iPhones have been slowing since they were rolled out.

Cisco (CSCO) - sometimes it's better to say nothing.

Cisco reports tonight. Last quarter, they took the bar down due to concerns about a slowing global economy. Despite what stock prices are saying, I don't think the macro environment has changed for the better. I wouldn't think there has been a dramatic change in visibility for them. I also don't think it's a disaster per se.

My concern is it comes down to some hair splitting over the quarter and I'm not prepared to make a call on it one way or the other... and that's why I'm quiet. Nothing else matters right now. There are two pivotal earnings reports in technology -- Intel and Cisco. Both tend to be the starting points for longer moves.

A good Cisco number is likely to put the SOX into the 410-420 range. I would think it will take more than a slight upside to break technology out. I'm not inclined to make a call before the number but I will have to make one after it.

DRAM contract up 12% for 1H May

Posted DRAM contract prices are quoted up 11.5 - 12% for the first half of May.

It's catch-up with spot... but a good sign.

Still liking Micron here.

Earnings Estimate Cheat Sheet – May 5, May 6, May 7, May 8, 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
5/5/2008	ALVR	65.3	0.1	0.02	1.5	68.6	5.07%	0.9	0.03	3.0	289.3	8.3	0.20	15.5	360.0	27.8	0.48	32.1
5/5/2008	LOOK	15.0	(1.5)	(0.06)	--	15.6	3.99%	(1.3)	(0.05)	--	63.7	(4.3)	(0.16)	--	68.7	(0.6)	0.03	5.4
5/5/2008	PWAV	203.4	(3.7)	(0.03)	--	212.7	4.56%	0.4	(0.00)	--	882.8	13.3	0.07	68.1	959.9	45.4	0.26	98.1
5/5/2008	RTEC	34.9	0.0	0.01	--	36.7	5.07%	1.1	0.04	--	156.4	10.0	0.28	23.0	195.1	28.0	0.73	--
5/5/2008	STEC	46.1	1.1	0.03	2.8	50.3	9.00%	3.5	0.06	6.6	218.4	18.9	0.29	33.5	277.3	43.9	0.62	54.4
5/5/2008	SYMM	52.1	2.5	0.06	4.9	55.7	6.92%	3.9	0.09	7.1	207.3	9.3	0.23	17.9	227.4	16.6	0.37	32.5
5/6/2008	CSCO	9,750.1	2,754.1	0.36	3,166.8	10,296.4	5.60%	2,943.0	0.39	3,362.3	39,427.2	11,418.9	1.54	12,825.8	43,931.5	12,828.1	1.69	13,982.0
5/6/2008	DIS	8,466.0	1,787.7	0.51	2,143.9	9,216.4	8.86%	2,239.0	0.62	2,548.0	37,405.7	8,009.7	2.24	9,361.4	38,771.7	8,352.7	2.40	9,848.5
5/6/2008	HYC	68.2	(3.8)	(0.07)	(1.3)	72.7	6.69%	(1.3)	(0.01)	(0.7)	304.6	0.5	0.02	0.8	330.8	2.8	0.08	9.0
5/6/2008	ITWO	62.7	6.8	0.16	--	65.2	3.93%	8.6	0.22	--	259.1	34.5	0.82	--	265.0	38.1	0.92	--
5/6/2008	JCOM	59.1	25.3	0.38	28.0	61.5	4.00%	26.6	0.39	29.3	250.5	108.9	1.61	119.3	288.8	129.6	1.87	137.7
5/6/2008	MFLX	152.5	9.8	0.27	12.2	162.2	6.37%	10.8	0.29	16.0	677.3	51.8	1.43	75.1	788.9	54.8	1.38	79.1
5/6/2008	MXWL	16.4	(3.0)	(0.18)	(1.6)	16.9	3.10%	(2.8)	(0.16)	(1.5)	71.2	(9.7)	(0.59)	(4.5)	87.3	(3.7)	(0.25)	2.6
5/6/2008	NILE	68.5	2.9	0.14	4.6	77.8	13.61%	5.3	0.22	6.9	352.7	24.0	1.06	30.4	407.1	30.0	1.28	36.3
5/6/2008	OPTV	25.1	(2.8)	(0.01)	(0.2)	24.7	-1.50%	(2.1)	(0.01)	0.5	109.9	(2.7)	0.00	7.8	126.5	9.8	0.09	19.4
5/6/2008	RFMD	222.1	(7.6)	0.01	--	238.3	7.30%	0.9	0.02	--	960.6	16.0	0.21	--	1,057.6	42.2	0.19	--
5/6/2008	SNCR	31.2	8.3	0.16	9.9	35.2	12.77%	10.2	0.19	12.3	155.0	47.8	0.91	55.0	190.1	62.6	1.13	68.8
5/6/2008	SOLD	11.1	(2.4)	(0.05)	0.0	10.6	-4.50%	(1.8)	(0.04)	0.0	41.3	(6.0)	(0.14)	--	44.0	(5.0)	(0.05)	4.0
5/6/2008	THQI	200.8	(12.7)	(0.06)	(12.0)	123.7	-38.37%	(21.0)	(0.17)	(17.7)	1,043.8	(25.9)	0.05	(20.0)	1,199.4	105.2	1.19	111.3
5/6/2008	TKLC	106.7	12.9	0.16	--	115.2	7.97%	15.8	0.19	--	461.8	64.4	0.76	77.0	494.8	74.2	0.87	87.7
5/6/2008	TXCC	7.4	(4.6)	(0.04)	--	9.8	31.93%	(2.2)	(0.02)	--	42.0	(7.8)	(0.06)	--	--	--	--	--
5/6/2008	UNTD	118.8	16.1	0.24	32.3	119.3	0.39%	19.3	0.26	35.4	473.9	77.3	1.07	143.8	443.9	64.5	0.98	141.6
5/6/2008	VCLK	169.6	25.3	0.16	39.2	174.9	3.11%	28.4	0.17	41.5	739.0	128.2	0.79	183.6	848.8	158.3	0.97	211.7
5/6/2008	WBMD	81.6	1.0	0.05	8.5	89.6	9.84%	6.9	0.10	14.8	386.7	46.1	0.60	72.9	443.5	65.6	0.89	94.4
5/7/2008	ACLS	86.7	(11.6)	(0.09)	(6.0)	86.9	0.21%	(9.8)	(0.06)	(4.1)	359.9	(36.7)	(0.21)	(18.2)	380.0	(14.1)	0.11	(2.7)
5/7/2008	ALTI	3.1	(6.3)	(0.08)	(6.8)	3.6	14.86%	(6.2)	(0.08)	(6.7)	20.5	(24.0)	(0.30)	(26.2)	35.2	(23.1)	(0.28)	(21.6)
5/7/2008	BBBB	65.5	3.6	(0.00)	6.4	75.8	15.77%	10.7	0.14	12.7	310.3	48.1	0.63	55.2	380.6	80.5	1.24	96.4
5/7/2008	BLKB	69.1	14.6	0.20	--	75.5	9.20%	18.8	0.25	--	300.8	74.4	1.01	--	346.1	89.3	1.20	--
5/7/2008	CTSH	642.9	111.2	0.33	128.9	708.7	10.24%	123.2	0.36	143.6	2,953.9	517.5	1.51	597.4	3,904.3	683.5	1.81	793.0
5/7/2008	EMKR	56.4	(4.5)	(0.05)	--	76.4	35.35%	(0.9)	0.01	--	270.0	(4.7)	(0.11)	--	445.7	21.3	0.40	--
5/7/2008	ONNN	386.9	51.6	0.14	75.5	388.7	0.45%	54.4	0.15	83.3	1,585.9	234.4	0.65	348.9	1,634.9	286.8	0.84	390.1
5/7/2008	SMSI	20.5	3.3	0.09	3.8	22.1	7.49%	4.0	0.11	4.6	99.6	24.0	0.64	25.6	124.0	36.8	0.89	--
5/7/2008	SUPX	20.2	4.0	0.26	--	21.3	5.73%	4.8	0.30	--	83.1	18.1	1.18	--	91.9	22.3	1.32	--
5/8/2008	AWRE	7.3	0.1	0.02	--	8.0	9.59%	0.2	0.03	--	34.4	2.2	0.16	--	40.0	5.4	0.33	--
5/8/2008	BRKS	141.9	(4.4)	(0.03)	--	143.8	1.36%	0.2	0.05	--	578.2	0.2	0.19	39.3	631.9	37.1	0.57	73.3
5/8/2008	CAMP	29.8	(10.3)	(0.11)	(8.0)	34.3	15.22%	(2.2)	(0.02)	(0.0)	140.9	(99.6)	(0.59)	(90.5)	159.8	(3.3)	0.07	5.3
5/8/2008	DIOD	96.1	15.6	0.35	22.9	100.0	4.00%	16.7	0.37	24.4	418.1	72.5	1.61	101.9	474.1	90.7	1.95	117.7
5/8/2008	ESIO	70.6	3.7	0.15	6.6	69.8	-1.15%	4.6	0.16	--	244.1	21.9	0.81	32.8	303.3	27.2	0.87	31.0
5/8/2008	HILL	50.6	(7.2)	(0.16)	--	60.2	18.88%	(5.7)	(0.12)	--	252.3	(17.8)	(0.42)	--	320.3	13.0	(0.07)	--
5/8/2008	KNOT	25.1	1.3	0.05	3.6	32.0	27.59%	6.5	0.14	7.6	113.9	17.4	0.40	28.4	132.7	26.7	0.59	37.9
5/8/2008	LEAP	459.5	26.6	(0.02)	119.6	471.1	2.53%	38.1	0.10	137.1	1,934.7	101.8	(0.39)	503.0	2,429.8	154.0	(0.03)	615.0
5/8/2008	LLNW	31.3	(1.9)	0.02	4.2	31.9	2.04%	(1.6)	0.02	4.5	136.8	(3.0)	0.10	22.0	175.6	7.2	0.19	39.8
5/8/2008	NSIT	1,121.1	22.8	0.23	34.3	1,332.8	18.89%	46.9	0.52	59.4	4,962.3	135.8	1.49	181.8	5,191.1	156.4	1.68	204.0
5/8/2008	NVDA	1,153.0	256.4	0.38	284.4	1,122.6	-2.63%	240.2	0.37	279.7	4,762.5	1,083.7	1.66	1,206.5	5,123.4	1,199.1	1.82	1,393.2
5/8/2008	PCLN	375.8	32.1	0.59	35.7	448.6	19.37%	77.4	1.30	81.6	1,761.4	307.3	5.11	325.2	2,078.4	413.5	6.46	437.0
5/8/2008	RNWK	141.6	(14.3)	(0.03)	11.2	150.3	6.14%	(12.6)	(0.02)	13.4	623.1	(48.2)	(0.06)	60.0	691.7	(41.6)	0.02	68.9
5/8/2008	VRSN	217.6	58.1	0.20	91.7	228.1	4.83%	66.9	0.24	100.1	935.0	289.0	1.05	427.3	1,106.9	419.7	1.64	559.2
5/8/2008	WEDC	25.6	0.6	0.04	1.9	29.2	14.21%	1.8	0.07	2.9	109.7	4.6	0.20	9.3	120.9	7.3	0.28	--