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Friday, June 6, 2008

Western Digital (WDC) engineers themselves into a box

According to this article, Western Digital is working on a 20k RPM HDD to combat the SSD threat. SSD is faster and uses far less energy than current hard drives, which in turn saves the end user a lot in ongoing energy cost. It's part of the total cost of ownership schpiel that SSD makers have to spin to get you to accept the outrageous cost of the hardware itself. A 20k mechanical drive is going to use a whole lot more power than the existing 10k drives. In effect, Western Digital is doubling up on a bad bet.

The only path here for hard drive manufacturers is to reinvent themselves for the future... and non-mechanical drives are the future -- they fail less, they cost less to run, they're smaller. Seagate has been rumored to be looking to make an acquisition in this space for a while -- STEC, even, according to this.

This is classic disruptive technology theory. Kodak didn't embrace digital cameras for years -- in fact, they invented the technology and deliberately buried it because it would kill their film sales. That's not how you survive. Cannibalize yourself before your competitors eat you. Clearly I don't think doubling up on mechanical drives is the way to go here.

It's just a story on a blog, though. It could be noise. A 20k RPM HDD is certainly a noisy proposition.

Er. Disclosure: I'm short WDC and long STEC. Go figure.

National Semiconductor (NSM) 4Q:2008 results

Surprising the street, National Semi put up a slight revenue beat to consensus with a big leap in gross margins to 65.9%, the first time they've broken above the 65% threshold. Revenues for next quarter will be 460-475mm, which also raises consensus estimates for next quarter. They guided their longer-term gross margin range to 65-70%. The company continues to execute very well despite a backdrop of slower wireless handsets and uncertain world economies. Handsets barely grew sequentially, the upside came from wireless amplifiers and power management.

I had expected the slower wireless business to interrupt their expansion. I guess not. The chart suggests the stock goes up another couple of points from here to 26.5ish.

Thursday, June 5, 2008

Goldman upgrades Nvidia (NVDA) to buy from hold

Citing Nvidia's share strength and anticipation of further gains against competitors AMD and Intel, Goldman upgrades Nvidia. His numbers inch up this year to $1.35, go up 15 cents next year to $1.55 and rise 11 cents to $1.71 for 2010. This puts him in line with consensus estimates (he was lower previously). It also lets me short stock into strength -- I'm offering some at 25.3 to get started.

Wednesday, June 4, 2008

Sun Microsystems serves up SSD

The Boston Globe has an article talking about Sun Microsystems' planned introduction of SSD storage in their enterprise products.

An excerpt:

Flash memory drives use chips rather than mechanical hard drives to store information. Their use is popular in consumer devices like MP3 music players and digital cameras. The chips cost far more than the equivalent amount of hard drive storage, but flash memories are smaller, lighter, and require less electricity.

Sun and EMC say flash drives are ideal for business users who need to swap huge amounts of data in and out of computer systems. Flash chips read and write information thousands of times faster than hard drives, enabling enormous increases in processing speeds, resulting in improved efficiency and savings. In addition, Fowler said Sun's flash memory drives use only about two watts of power, compared to roughly 12 watts for a typical hard drive.

While EMC only makes storage gear, Sun is a major vendor of server and storage equipment. Sun plans to introduce servers that replace some of the standard hard drives with faster flash drives. Fowler said in addition to conserving electricity, the servers will deliver three times the data throughput of servers using only standard hard drives.

The only real play on SSD right now is STEC. Frankly, this isn't going to be a wildly complicated business for others to get into... but the first mover advantage is likely to really help STEC's results for a while. I don't know if they're in the Sun product. I don't care. The business is in its infancy. I think the stock is likely to move much higher as SSD growth significantly bolsters results.

Graphics card inventory issue?

Jeffries is out with a note... at Computex in Taiwan he's picking up that there's a slowdown at the high end, that there's too much inventory out there, that graphics card makers are pushing customers to take more... sounds like a bad set up. Funny as just a couple of quarters ago Nvidia was caught short manufacturing capacity and had to scramble to meet demand.

This isn't a great setup for Q3 with Intel's Montevina notebook chipset with integrated graphic due to ship in August. I'm thinking Nvidia is a short on strength.

Tuesday, June 3, 2008

Western Digital (WDC) seems way ahead of itself

The hard drive industry is seeing some pretty severe price competition. I've been eyeing terabyte drives for under $200. I don't need a terabyte drive but gosh, it sounds cool to have to measure your storage with a whole new word. I've been fighting off the urge.

I've also been fighting off the urge to short WDC but I'm going to give in if it trades $38.10 ... I think the risk/reward there is terrible for the stock. I've been generally positive on the hard drive stocks on valuation... in the mid-high 20s I've recommended Western Digital more than once. Here it's a sale. Inventories remain on the higher side in the channel.

Digital River cancels out of Oppenheimer conference

Strange. They'd announced their attendance on their quarterly conference call, they have webcast links up... it's no scheduling snafu. I like to think one day they'll get taken out by Amazon or some other larger purveyor of digital content. Sometimes canceled conference appearances start rumors like that. Sort of like I'm doing now.

10:35am: Rumor going around Accenture (ACN) for them. :)

11:05am: Flyonthewall "reporting" DRIV didn't cancel.

Apple (AAPL) iPhone coming June 9

Doesn't it always run into their product intro events?

If the stock were $200 Monday morning, would you be surprised in the least?

Could this entry be any more sparse?

Nanya, Hynix raising DRAM prices yet again

Hynix was quoted yesterday saying they're looking to raise prices 15% for June. Nanya is on the tape (I don't have a link) this morning saying +10% for 1H June. It seems like prices are getting way ahead of demand and I'm starting to question the stability of the DRAM rally heading into the typically slower summer seasonality. I own some Micron.

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