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Friday, December 5, 2008

Business environment still deteriorating and its getting boring

The last couple of days have been quiet here at theskew. It's not that I'm not reading all about how bad business is. I am. I'm just not writing about it because its starting to feel awfully redundant. Do I add value in telling you AMD blew up again? That Intel numbers are coming down because AMD blew up? I don't know. It doesn't seem like its particularly helpful. Should I rant about the fact that congress shouldn't but will give the auto companies money because if they don't the economy will dead stop? That's on every editorial page in America.

Business isn't getting better. If holiday promotions, aggressive as they are, are failing to move product in better volumes, I fear the March quarter will be an unmitigated disaster – and I think that's what companies are telling you when they lower revenue guidance 25% for the December quarter and layoff 10-20% of their workforce. Things are going to get worse.

Despite the extreme volatility in the market this year, the business cycle we are in is extremely long. The credit-based expansion began in earnest during the Reagan administration with the advent of voodoo economics and has expanded for over two decades. It is unrealistic to expect a reversion to the mean to happen in a few short months. Bubbles are excessive speculative forces that reshape the landscape – when they pop they leave craters behind. It is very possible the economy will remain depressed for years to come. The stock market may well be in the 4th inning of a multi-year correction.

The Fed managed to break mortgage rates with their recently announced plans to buy mortgages. Refinance requests went through the roof. Unfortunately they also started to explore the idea of doing federally funded home loans at below market rates, which is likely to freeze the market again. Federal efforts to manipulate the market only complicate investor's ability to calculate true market valuations. It's hard to know what the true baseline is when they keep trying to prop up the baseline.

See, that's why I'm not writing much. Nothing has changed. Valuations appear reasonable if you assume business will resume normal trends. They probably won't. We're a consumer driven economy, which means we've been buying replacements for things we already have for years. Without disposable income and credit, its like our economy is geared wrong and it will take a long time for the excess capacity to dissipate.



Wednesday, December 3, 2008


Quick comment here. Company said they're planning for 4-6 quarters of flat to down. That's obviously not good on a fundamental basis. In terms of the stock, though, it sets expectations very low and that can be a benefit for investors down the road.


Company is saying they're focused on cost controls, they have a strong cash position. The problems in the industry are oversupply and consolidation and its obviously affecting orders. He's very specific in saying its not demand-related -- a debatable position as strength in netbooks and low-end notebooks are driving memory per box flat to down for the first time in several years.

Smaller customers are under massive over-supply pressure just to stay alive, they're not dying to buy more capacity. The bigger customers who can weather the storm are grinding down their gross margins by negotiating better pricing.

I think at some point the SSD bottleneck will break and there will be a big transition to SSD which will firm up NAND demand. Presently NAND configurations tend to be 4--32gb. When that moves to 80-120gb, it will start to soak up the supply. That's not going to happen until at least 4Q:2009 and even that might be aggressive in terms of time table. In the meanwhile, until these body shops in Asia churning out memory like they're potato chips shut down, the overcapacity situation will overhang the market.

Lam is a good company with great operating discipline and one to buy when there's some light at the end of the tunnel. For now, we're still fumbling around in the dark.

Cisco @ CSFB

John Chambers spoke for an hour about how well they're doing in internet teleconferencing and how great it is for productivity within Cisco itself. He travels less, it's environmentally friendly because he's not burning jet fuel, it allows him to communicate with people all over the world simultaneously, and he can talk instead of write as he says his english writing skills are poor.

He declined to talk about current business trends or try to guess at the shape of the downturn or the recovery. He's going to stick with the guidance he has out there unless he changes it.

Tuesday, December 2, 2008

Research In Motion (RIMM) preannounces lower

Press release here.

Revs guided to 2.75 - 2.78 bil vs prior expectation of 2.95 - 3.10 bil, non-GAAP EPS guided to .81 - .83 vs prior expectation of .89 - .97 ... subscribers 2.6 mil versus guidance of 2.9 million. Reasons for shortfall are currency and macro-economic weakness. In explanation, they talk somewhat about product launch delays (Storm) and about good sales trends and activations of new products.

Stock is interesting on the chart $30-31. Wonder if it gets there tomorrow morning.

Cablevision network problems today

I heard about 2 lines of the NTAP presentation and that was about it today. Intermittent internet connections are so 1999. I'm on Metro North now with the best connection I've had all day with my blackberry plugged into my netbook. So sad.

Marvell (MRVL) reports slightly better than their guidance, non-gaap eps a penny better. The stock is at $5. I have a scary line at $4.25 it may need to test and hold. There's resistance at $5.65 -- if it trades through there it can probably work to $7.5. I'd definitely wait for the guidance as unit forecasts stink and the supply chain continues to see cuts.

Omnivision (OVTI) guidance is pathetic. This is the big problem with value trap stocks -- they're "cheap" because they stink. Book value and large short interest are the bull proponents in this stock. With the company printing losses, book value will erode. Samsung, Micron, STM are all using their leverage in other components to take slots from them and Omnivision has nothing to respond with besides lower price. Add into the mix a weaker cell phone market at the low end and tighter credit standards that hold back new adds. Not pretty for Omnivision. Cheap, though!

CSFB Tech Conference underway in Arizona

I'm going to listen to a few of these. The conference is being webcast and has links to the Q&A sessions which is a rarity.

In the opening keynote, Michael Dell said Black Friday was pretty good, that the audience survey of a PC market down 0-5% next year sounds reasonable to him. He doesn't foresee a big drop in demand after the holidays but he also said it will depend on the economy.

Monday, December 1, 2008

What the hell is Cyber Monday?

There's a lot of Black Friday estimates out there. The takeaway for me is people really like low priced merchandise and will kill you to get to it first.

From what I've read items under $500 move all right, specifically low priced notebooks.

I read a couple of times that Amazon is doing well because online sales were flat to up slightly on Black Friday. Amazon guided up 10-25% for the December quarter. I don't think flat to up slightly is going to help the stock price much. In fact, a number like that would send it to $30 pretty quick. It's very early to be making a call on the holidays as Black Friday is technically the beginning of the selling season.

Not to be outdone by the Black Friday headlines, online retailers have declared today "Cyber Monday". That is one lousy name. What is Cyber Monday?
Apparently it's site maintenance day for the Gap, Jcrew and Bloomingdales. They're all doing so well this holiday season they've got more important things to do with their sites than sell stuff. Nice planning, folks.

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