Apple (AAPL)

Hmm. I'm going to have to put a stop on this trade. Breaks $157 and I'm out.

Gross margins missed consensus by 3/4 of a point on a big revenue upside.

I kind of think for them to increase their mac share like they did, that's something they should get a pass on -- they can trade some margin for some share. I also think Apple bought very little NAND in the quarter and they were passing through much higher cost NAND all quarter through iPod.

Action is troubling.

4:55pm -- funny. Broke $157 before I even posted it. I'm out.

Apple (AAPL) 2Q:2008 Results

iPods better at 10.6 mil.

Macs better at 2.86 mil units.

Gross margins a little disappointing.

EPS above the printed mean but probably below the whisper.

Guidance of 7.2 bil and EPS of $1.00 is better than consensus. THATS A BIG DEAL AND THE MOST IMPORTANT THING IN THE RELEASE. They guide conservatively.

I bought stock at $162.

8:25pm: As John pointed out, I was overexcited here. (Note the caps. God.) I still think the revenue guidance in line with the street is "better" in Apple-speak, but it is sequentially down and the EPS guidance is below consensus. Sorry if I caused you any pain.

Xilinx (XLNX) 4Q:2008 Results

As I previewed, Xilinx misses and guides a bit below consensus. Gross margin guidance of 63-64 looks pretty good actually, but revenue guidance with a midpoint of +1% puts the single point at $480mm with the street at 489mm. I'm sure there's going to be talk about inventory build in the distributor channel on their call.

I'll use weakness to cover. I'm not in this long-term. It was just a trade around the number.

Mattson (MTSN) 1Q:2008 Results

The Company's guidance for the second quarter of 2008 is predicated on a
protracted weakness in the DRAM market. For the second quarter, Mattson
expects the following:
-- Revenues in a range of $40 million to $45 million
-- Gross margins between 39 percent and 41 percent
-- Earnings in a range of loss per share of ($0.17) to loss per share of
($0.10)
-- Fully diluted share count of 49.5 million.


... the street is at $51mm with gross margins of 44%, looking for a profit of 3 cents. Big disappointment.

Lam Research (LRCX) Q4:2008 preview

Orders are going to stink. Memory capex cutbacks are upon us and severe. The problem is... well, we ought to know that. Who is wildly bullish on memory here besides a handful of Sandisk traders with some fresh spot quotes?

Samsung, a big customer of Lam's, is kind of the only company that hasn't cut back capex. Expect them to bring theirs in also when they report.

The stock probably has good support in the upper 30s. Expect somewhat precipitous orders to be met with cries of the bottom. These are tricky stocks in that the core investor plays long ball. It's dangerous to try to game them on a quarter to quarter basis. The current trend is down but this number will be bad enough that investors will start to think about improving rates of deterioration going forward.

Mattson also reports tonight and should have a similarly gloomy outlook.

I feel a little queasy even thinking that but my experience is this is setting up to be the kind of cataclysm news-wise that you get at bottoms.

It's going to be a bad number... and maybe you've got to buy the aftermath. But let's let them blow up first, shall we?

Needless to say, if we see the kind of cutbacks I hope, it's going to embolden buyers of Micron (MU), who have been pecking away at the stock the last few sessions. I think declining capex orders coupled with a rising spot price for DRAM and NAND can continue to move the stock higher.

Apple (AAPL) 2Q:2008 preview

Ok. In brief:

AAPL -- street is expecting good margins for the quarter on the back of strong Mac sales and increased gross margins on meager iPod sales. Numbers have been creeping higher for the last week or so.

iPods -- 9.5 - 10.5 million. If it's the low end, it will be a negative surprise. Apple bulls think people concerned about iPod #s are silly and missing the larger picture. Hard to see much improvement here near-term.

Macs -- market share gains (IDC showed Mac had picked up a percentage point of share -- thats a big # when you consider Mac originally had 5% and now it's 6% -- a 20% increase) and the too cool for school Macbook Air should total Mac unit sales in the 2.1-2.2 mil range. Anything less would be a disappointment.

iPhones -- kind of the blind spot in the story here near-term. Lots of speculation on when the 3G iPhone will ship. Street may be disappointed if it doesn't ship in June. Expect to see them reiterate their 10 mil unit forecast.

Citi's Rich Gardner was out with a pretty substantial gross margin forecast increase this week, raising his estimate to 36.5%. The street is still under 34%. He also raised his revenue forecast to 7 billion. He says the company will guide revenues, gross margins and profits lower on a sequential basis -- the street is forecasting higher revenues of 7.2 bil for next quarter and this could obviously create some after-market controversy. The bulls will tell you that Apple has become notorious for low-balling the street on guidance.

I'm not involved in Apple at present.

IBM should buy EMC

They both want to do cloud computing.

They're both heavy infrastructure sales.

EMC's single largest cost is hard drives which IBM makes.

IBM has a lot of cash and this is a retrenchment year for big tech -- they will do acquisitions.

EMC is an embedded enterprise sale with an ongoing, annuity service component. IBM likes that kind of business.

IBM has been doing well in software. EMC comes with a 65% stake in VMWare and a number of other software businesses.

It seems really obvious now that I've bought EMC. Funny how that works.

Micron (MU) chart

What I like most about technical analysis is you can draw any damn trend line you can find.

The state of technology so far

 

So here we are, on the other side of the first week deluge of earnings reports. It's helpful for me to talk about what I'm getting from the reports to see if there's anything thematic developing and to make sure the themes I've previously perceived are actually there.

 

The PC is more recession resistant than people think.

Intel held share, AMD is slipping further away. At Intel, there's not a lot of further slippage since the bar came down.

Broadcom, after a long spell of sub-par performance, has started to show some top line improvement.

Memory prices have picked up of late. Sustainability in DRAM is questionable as these price hikes are driven by how weak business is, not how strong it is. It's a commodity market and it's unlikely will power alone can hold prices up.

The SOX was pricing in far worse results than it's gotten so far.

At 340, many bellwether semis were trading at 10-12* earnings estimates with the justification being the earnings estimates were too high. Estimates have come down but not enough to earn those lower valuations. My experience is that the average semi move is 20%. At 385, we're a little over half-way there. I think they have room to 410 and the index is likely to continue to carry there. The summer is starting to loom. Historically tech sucks in the summer so it better get to 410 quickly.

The semiconductor capital equipment industry is too dependent on memory right now.

That said, capital equipment makers are suffering badly from their dependence on memory. Memory prices have been better since April began but were terrible for the first quarter. Part of the improvement in memory pricing of late is due to capital spending cutbacks by memory manufacturers. This puts the onus squarely on the equipment stocks, which are running far higher than historic dependency on memory for their success. Companies such as Lam Research (LRCX), Varian Semiconductor (VSEA), Mattson Technologies (MTSN) and even mighty Applied Materials (AMAT) have between 50 and 80% of their present business in the memory market. Novellus (NVLS) recently guided to a 25% decline in orders for the coming quarter. Expect to hear that echoed by the industry. Lam Research (LRCX) reports tonight and is likely to reset the order bar severely – it's a short.

The wireless industry is under pressure.

Sub adds have weakened. Subprime problems have caused back-up in the lower end of the US market. Motorola is in shambles. The high end appears to be dominated almost exclusively by Research In Motion (RIMM). Nokia and Ericsson have hit a wall at the high end as Blackberries and iPhones steal all the glory. Texas Instruments took the bar down when they reported but probably not enough. There's still more painful transition going on in this industry that could go on throughout this year.

Digital TVs will enjoy boisterous growth as the FCC analog cutoff date approaches.

There's a lot of capital spending in digital TVs as is evidenced by Photon Dynamics (PHTN) order guidance rising so dramatically. Corning is seeing good glass demand. Applied Materials also saw very strong orders in flat panel display equipment. Optronics (AUO) had good numbers. There's certainly a strong build here. This could get derailed by weak consumer spending habits as we move through the year. It's early to call Christmas but there's certainly room for improvement in terms of sell through.

IT spending has not fallen off a cliff… yet.

There's a pause. Companies seem to be saying business will be back later in the year. They're just pushouts and the business will close next quarter. I think this is completely wrong. Those pushouts are rapidly becoming multiple quarter phenomenon. No IT manager wants to be a hero here. Spending is always watched closely when growth is flagging. The financial industry is incredibly important to overall IT spending and its very likely they'll be pulling their horns in all year in anticipation of budget cuts and a lack of ability to get widescale projects approved in an uncertain environment. I find myself becoming increasingly negative on software stocks. I don't write on the sector much but I should start doing that more often.

 

Ok, enough history. Back to the present.

*DJ Yahoo CEO: We're Making 'Brisk Progress' Against Strategy

They're making brisk progress against strategy.

Well, that pretty much says it all, doesn't it.