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Wednesday, July 30, 2008

Lam Research (LRCX) 1Q:2009 results

Lam reports much better than expected for the current quarter, beating top and bottom lines. Stock trades up 3. Guidance is significantly below the street at 425-455 mil with street looking for over 500 mil. Despite the dozen questions they got about it, the company says September is the trough for memory spending and foundry spending. They're even predicting a memory shortage in December.

I was thinking they'd give up the notion of an improving December order quarter and they didn't do that. The stock is interesting in that if they're right they're the only ones that believe the case they're laying out right now. It's hard to envision memory shortages with so much oversupply at present but there have been a lot of recent cutbacks in planned capacity additions and the market is dynamic.

For now, Lam is still 75% memory-related business and near-term that's getting worse not better. I can't tell you to buy it... but I can tell you when the cycle turns to buy this one first.

Tuesday, July 29, 2008

Atheros (ATHR) 2Q:2008 results

Quarter was slightly better on the top line with a slight gross margin miss. EPS beat consensus by a penny due to a lower tax rate, which averted an EPS miss.

Revenue guidance for next quarter of 13-15% sequential growth equates to 136-139mm, which is slightly better than consensus. Gross margin guidance of 48.5 - 49.5% is well below estimates. Broadcom had a similar dynamic to their quarter -- much bigger revenue blowout with a forecasted decline in gross margins -- the stock is down 20% since. I would expect Atheros to trade lower... in fact, I added to the short at 29 pre-opening.

Though 802.11 is a high growth market, Atheros is highly dependent on 802.11g -- the older flavor. It makes up 63% of revenues. As 802.11n is quickly becoming the mainstream part, 11g pricing will erode quickly. I don't expect their margin situation to change any time soon. The company has talked about adding in new lines of business with large TAMs (total addressable markets) -- this likely means they'll do a large acquisition at some point. Their future is fraught with pricing pressure and integration risk. I don't like it.

Monday, July 28, 2008

Atheros (ATHR) reporting tonight - shorting a little

Marvell and Broadcom were both excessively strong in 802.11 -- which isn't surprising as notebooks are so strong and they're starting to get some handset penetration with the technology. I wonder, though, if Atheros couldn't be seeing some competitive pressure -- if that strength at Marvell and Broadcom isn't a bad omen. Both MRVL and BRCM have come in pretty good since reporting.

The chart seems very iffy to me. I see resistance at 31.5 and a lot of lines below.

This trade is risk/reward. I think I might lose 80 cents and I could make $10. So I'm going to try it. I have nothing special.

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