DRAM spot firmer; Micron

I'm reading about this big rally in DRAM spot prices. There have been a lot of capacity cutbacks of late and I guess it's leading to speculation of tighter supply going forward. That will probably prove true at some point, but I think its way too early to be thinking that way.

From what I understand, inventories at the OEM level are pretty high. The lowered guidance from companies like Intel and National Semiconductor are not indications that the situation is about to get better. There's an awful lot of economic concern out there and it wouldn't be surprising to see further weakness in PC sales as we move through this uncertainty.

Micron has some substantial design wins in CMOS sensors (camera phones) at Nokia. I think by mid-2008 they could go from single digit market share at Nokia to the #1 supplier. The Intel NAND business will begin to generate cash for them due to accounting -- for the first few quarters they had to put money in, now they'll be getting cash back. Relative to other companies in the space, they're likely to look pretty good. That said, I don't love their recent re-embrace of the DRAM market. They went from deemphasizing that business as a driver to saying they have to fight it out in the trenches with low cost Asian producers -- a difficult endeavor for a more unionized workforce. I think it's going to be very hard for them to succeed in memory.

I wouldn't chase a DRAM spot rally here.

FormFactor Q4:2007 Results

Unsurprisingly, another memory market supplier takes it on the chin.

Formfactor misses consensus revenues by approximately 5mm, coming in at 120mm versus expectation of 126mm. They blamed the shortfall on manufacturing issues with their new Harmony platform and said lead times have improved on this product significantly -- and wouldn't you know it, bookings declined a bunch. Lower bookings would improve product availability and bring down lead times -- one wonders if anything has changed in terms of their manufacturing issues -- all we know is they can meet demand better than before demand dropped a lot. They seem to be suggesting that customers couldn't wait for them to bring on more test equipment and had to resort to using competitor's available products and telegraphing weakness until at least the second half of the year.

Revenue guidance for Q1 falls to a 3 year low, coming in at 70-80mm versus street expectations of 120mm -- a 35-40% miss. That's... impressive. They lay off 14% of their workforce due to deteriorating DRAM recovery conditions.

And lets not even get into the cost accounting questions that will continue to dog the company. On second thought... lets get into it. This company had very suspicious margins for a prolonged period of time. I say suspicious because they held up amazingly well in an environment where all their competition saw cost pressures that somehow FormFactor managed to avoid. Sometime later, coincident with their CFO's departure, they discovered accounting irregularities. To me, this kind of discovery brings the whole historical model into question. Trying to gauge where business will stabilize is impossible as the measuring stick has the wrong numbers on it.

I'm sure there's value there but good luck figuring out what it is. It's unanalyzable in its current FORM as I think the whole business model is suspect till they clear the accounting dirt. As a bonus, they're a memory capex supplier, which is my least favorite sector.

Apple takes advantage of lower memory prices

Apple announced iPhone and iTouch models with double the memory of existing models for another $100 on either model.

Storage ain't the problem here, guys. It's data speed. We need 3G. And give us a nifty fold-up Macbook Air-type keyboard, please. That touchpad keyboard is sooo Atari 400.

NSM guides down

Revenues for the quarter will be 450-455 mil versus their prior guidance of 475-495 mil (down 1-5%). Wireless handsets and other unnamed consumer devices are the culprit.

National's revised outlook is attributable mainly to products for wireless handsets and other portable electronic devices. The shortfall in the third quarter is due to lower-than-expected shipments to global original equipment manufacturers (OEMs) as well as handset companies in China which National serves through distribution channels.

Texas Instruments will have the same problem in 3-6 months. I think TXN is a short.

Here's the press release:

National Semiconductor Revises Revenue Outlook for Third Quarter of Fiscal 2008
Monday February 4, 4:00 pm ET

SANTA CLARA, Calif., Feb. 4 /PRNewswire-FirstCall/ -- National Semiconductor Corporation (NYSE: NSM) today announced that it is lowering its sales outlook for the third quarter of fiscal 2008, ending February 24, 2008. National had originally guided on December 6, 2007 that third quarter fiscal 2008 sales were expected to be down 1 percent to 5 percent sequentially. The company now expects sales for the third quarter of fiscal 2008 to range from approximately $450 million to $455 million, down from the $499 million in sales that were achieved in the second quarter of fiscal 2008.

National's revised outlook is attributable mainly to products for wireless handsets and other portable electronic devices. The shortfall in the third quarter is due to lower-than-expected shipments to global original equipment manufacturers (OEMs) as well as handset companies in China which National serves through distribution channels.

As a result of the lower sales range, gross margin is now expected to be approximately 63.0 percent in the third quarter of fiscal 2008, which is slightly lower than the original guidance range. The company's gross margin in the second quarter of fiscal 2008 was 64.4 percent.

Also, third quarter fiscal 2008 results will include nearly $20 million of pre-tax charges in accordance with the company's action announced on January 21, 2008 to eliminate positions in manufacturing facilities and dispose of certain underutilized manufacturing equipment.

National's third quarter financial announcement and conference call are scheduled for March 6, 2008 at which time the company will discuss financial results in more detail and provide an outlook for the fourth quarter of fiscal 2008.

Special Note

This release contains forward-looking statements dependent on a number of risks and uncertainties pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Except for historical information contained herein, the matters set forth in this press release, including management's expectations regarding future financial performance, are forward-looking statements that involve certain risks and uncertainties that could cause actual results to differ materially from those forward-looking statements. A more complete list of risk factors is included in the Company's Annual Report on Form 10-K for the fiscal year ended May 27, 2007 under the captions "Outlook", "Risk Factors" and "Management's Discussion and Analysis of Financial Conditions and Results of Operations" contained therein and the Form 10-Q for the quarter ended November 25, 2007.

About National Semiconductor

National Semiconductor, the industry's premier analog company, creates high-value analog devices and subsystems. National's leading-edge products include power management circuits, display drivers, audio and operational amplifiers, interface products and data conversion solutions. National's key analog markets include wireless handsets, displays, communications infrastructure, medical, automotive, industrial, and test and measurement applications. Headquartered in Santa Clara, Calif., National reported sales of $1.93 billion for fiscal 2007, which ended May 27, 2007. Additional company and product information is available at http://www.national.com.

Media Contact: Financial:
LuAnn Jenkins Long Ly
National Semiconductor National Semiconductor
(408) 721-2440 (408) 721-5007
luann.jenkins@nsc.com invest.group@nsc.com


Source: National Semiconductor Corporation

Earnings Estimate Cheat Sheet – February 4-5, 2008

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
AUDC	42.4	3.0	0.08	--	42.0	-0.86%	2.5	0.06	--	157.8	6.9	0.18	--	181.7	15.3	0.35	--
LVS	1,118.8	224.9	0.35	285.2	1,338.8	19.66%	293.3	0.53	330.2	3,019.0	478.4	1.02	789.4	5,602.7	1,211.2	2.23	1,648.8
NTCT	47.6	(7.8)	(0.21)	--	55.1	15.85%	5.8	0.07	--	160.2	10.0	0.04	--	240.4	33.1	0.46	--
NWS/A	8,268.1	1,239.0	0.27	1,543.7	8,412.8	1.75%	1,404.6	0.33	1,693.1	32,077.0	5,187.8	1.18	6,383.5	34,396.6	5,878.7	1.43	7,060.5
PWAV	227.1	(0.5)	(0.01)	--	202.9	-10.69%	(2.4)	(0.02)	--	776.5	(60.6)	(0.45)	(12.7)	881.1	20.3	0.09	62.9
RCII	715.2	64.1	0.41	86.1	740.1	3.48%	84.3	0.58	101.6	2,903.8	306.2	1.98	387.8	2,896.0	314.6	2.14	393.7
RMBS	40.0	(23.0)	(0.10)	--	51.0	27.50%	(10.0)	(0.02)	--	180.0	(61.0)	(0.23)	--	240.5	3.0	0.25	--
SCUR	68.2	9.8	0.10	11.1	66.7	-2.28%	8.5	0.09	10.9	257.6	32.4	0.31	39.6	292.6	42.6	0.46	49.4
SGTL	35.6	(6.7)	(0.14)	(4.6)	29.1	-18.16%	(9.7)	(0.22)	(7.1)	129.5	(39.1)	(0.87)	(27.4)	144.5	(26.3)	(0.64)	(16.5)
SIRF	101.0	20.2	0.32	23.4	92.4	-8.54%	15.4	0.24	15.0	329.6	58.3	1.05	51.0	445.8	95.2	1.32	84.8
SNCR	35.7	10.3	0.20	12.0	36.3	1.77%	9.6	0.19	12.3	122.8	33.3	0.71	40.2	166.2	48.2	0.91	55.4
SOHU	55.8	11.4	0.31	16.5	59.3	6.37%	12.5	0.32	17.7	180.1	29.4	0.85	46.3	273.1	62.3	1.54	82.5
SPRD	46.6	6.9	0.17	--	39.9	-14.51%	1.3	0.05	2.1	143.6	14.9	0.45	20.9	214.2	27.9	0.66	39.7
SVVS	198.1	5.9	0.02	38.5	209.3	5.65%	5.8	(0.05)	38.4	790.2	305.2	4.53	112.9	908.6	49.3	0.44	189.4
TMA	71.2	--	0.27	--	75.7	6.34%	--	0.30	--	(785.3)	--	(7.23)	--	325.3	--	1.21	--
ARTG	38.2	2.0	0.02	3.5	35.0	-8.40%	2.5	0.02	4.9	136.5	4.5	0.05	11.3	154.3	13.6	0.11	19.9
BHE	720.6	27.4	0.33	39.4	719.0	-0.23%	28.1	0.34	42.6	2,901.9	104.1	1.33	141.9	3,060.5	121.5	1.53	160.7
CNET	122.5	19.3	1.29	33.3	99.3	-18.96%	(1.5)	(0.01)	11.5	410.2	1.2	1.12	70.1	448.7	31.7	0.13	91.4
CVLT	49.8	8.8	0.15	9.6	54.6	9.55%	11.6	0.19	12.3	195.8	33.5	0.58	40.2	242.9	47.3	0.76	55.9
DIS	10,043.7	1,847.3	0.52	2,204.3	8,387.1	-16.49%	1,729.8	0.48	2,070.5	37,037.4	7,714.1	2.12	9,077.8	38,612.5	8,189.3	2.33	9,652.2
FORM	126.0	24.1	0.36	35.0	124.5	-1.24%	23.5	0.35	--	467.0	92.8	1.50	120.0	541.9	103.2	1.65	133.1
IIG	27.2	(5.3)	(0.14)	--	32.7	20.35%	(1.5)	0.04	--	126.7	(11.0)	(0.08)	--	--	--	--	--
IMNY	11.0	(1.0)	(0.01)	0.0	11.1	0.45%	(0.6)	0.00	--	40.1	--	(0.16)	--	51.0	2.0	0.05	--
INSP	34.4	(13.5)	(0.29)	1.4	34.6	0.49%	(11.6)	(0.25)	3.8	240.3	(67.6)	(0.81)	--	137.2	(22.7)	(0.32)	18.5
IVAC	14.9	(10.1)	(0.29)	(9.3)	24.9	67.38%	(5.4)	(0.13)	(6.9)	214.0	24.5	1.06	29.0	148.1	(0.3)	0.22	0.4
JDSU	386.4	16.4	0.12	30.0	390.2	0.98%	18.2	0.12	31.0	1,541.9	68.2	0.46	115.1	1,712.2	139.2	0.71	181.5
MANH	88.6	16.0	0.39	17.4	84.7	-4.45%	11.1	0.28	13.8	341.0	53.1	1.32	60.8	374.6	62.4	1.51	70.0
MFLX	175.3	5.0	0.14	10.0	154.9	-11.60%	4.2	0.10	9.2	674.6	24.0	0.60	43.7	750.7	38.3	0.85	56.7
QSFT	178.3	39.9	0.28	--	160.1	-10.20%	27.7	0.20	--	622.2	119.8	0.88	--	684.8	134.1	0.95	--
QSII	46.8	14.9	0.36	16.3	53.4	14.10%	17.5	0.40	18.2	187.5	59.1	1.40	63.8	223.9	75.9	1.70	79.7
RVBD	71.1	13.6	0.19	15.2	76.4	7.36%	15.5	0.15	13.7	231.1	42.1	0.64	48.5	350.5	80.3	0.75	71.9
THQI	503.3	31.0	0.33	35.2	211.4	-58.00%	(9.7)	0.01	0.6	1,048.6	(11.5)	0.22	9.9	1,224.0	114.5	1.29	124.7
TZOO	20.2	4.9	0.14	4.9	22.0	8.70%	5.7	0.18	6.0	80.0	23.0	0.70	23.2	91.7	23.7	0.78	24.1
VSH	722.0	65.5	0.25	118.8	731.5	1.32%	71.6	0.27	126.2	2,825.6	263.9	1.02	473.6	2,994.6	303.8	1.15	514.5