SOX chart

The next level?

Nvidia (NVDA) chart

Bought a little at 12.80

Nvidia (NVDA) probably won't stay down here

The stock is takeover bait under $14. Expect to hear the recurring rumor that Intel is planning to acquire them. And Intel should be considering it down here... though I wonder if it would pass regulatory muster. Nvidia remains the market share leader in notebook graphics chips. It is likely that AMD will wrestle with liquidity problems over the next year -- this may put further pressure on pricing for the next several quarters. Intel will also be stepping up their low end graphics chips offerings, assuming they get them working correctly.

The chart is a mess. I don't see anything down here at all. And the story sounds horrible. Yet I think the franchise is undervalued at this level. We'll see.

Nvidia (NVDA) lowers guidance

So there was an inventory issue in graphics cards and I suggested shorting Nvidia into Goldman's upgrade.

The company just preannounced significantly lower sales than forecast -- consensus is close to 1.1 billion and they're saying 875-950 mil. They cite the delay of Intel's Montevina, a lousy worldwide economy and lower pricing assumptions to fend off competitive threats. I do think the worldwide economy is a great excuse but I think Nvidia was stuck on a growth trajectory it couldn't maintain. They were overproducing and it bit them in the ass.

They're also taking a massive $200 million dollar charge against products failing at unusual rates in the field due to what appear to be heat issues from the description of the problem.

A real STEC in the mud

What a pig.

I don't even know why its going down anymore.

An interesting opinion article from the chief strategy officer of EMC's Symmetrix division. He says Zeus drives rock.

STEC also took out a credit line with Wachovia. They're buying a mcmansion. I jest!

STEC intends to use the proceeds from the credit facility to fund its working capital requirements, including the increasing inventory and accounts receivables of its growing SSD business. The Company believes the new credit facility together with its existing cash-on-hand, which was approximately $74 million at the end of the first quarter of 2008, will provide adequate liquidity to support expected accelerated growth in future quarters.

Expected accelerated growth sounds good, no?

I would think lower NAND prices would be good for them -- it will drive adoption of SSD drives.

I also think I'm a goddamn moron paying $13. Ahh, hindsight. I love it when I can be right when I'm wrong.

Still long but not so strong.

How many bailouts does it take to screw in a lightbulb?

Banks. Airlines. Autos. Brokers. All of these industries are grappling with structural issues that are unlikely to improve over the near-term and all are likely heading toward catastrophic failure if something doesn't change soon.

The government in the past has had to bail out the first three industries. Besides being vital symbols of America, the country probably won't run particularly well without airlines and banks. Autos, well... I'm not sure the country runs better with the american auto industry but it does employ an awful lot of people.

That bailout money is going to have to come from somewhere. Iraq would be the most logical choice -- at a cost of $500 billion and counting, our efforts to de-stabilize and then re-stabilize the region on a war of false-pretense seem morally unsound. But yet, the region seems to be destabilizing around us. The higher oil goes, the more brazen Iran becomes. Though we probably don't belong there in the first place, I'm not sure we can leave right now.

It's tough to paint a really positive picture for the economy, particularly for the dollar. I don't know what turns this situation. Lower oil prices would help but that's a bandaid. The wound to the financial system is much deeper than that. We need a massive reduction of risk and leverage. And that's just going to take time and pain. There's no quick fix for it.

I wouldn't want to be President next year. Talk about your disasters. Me. President. Oh, man. Look on the bright side... I guess it could be worse.

Micron (MU) pretty much in line, cuts capex

Micron reported. It was pretty much in line with expectations -- and the stock drops 10% anyway on NAND pricing concerns. Micron stated they believe chip dealers (yes, there is such a thing) are too long NAND and that inventory in the channel needs to come down and retail demand needs to pick up for there to be some kind of equilibrium in the market. DRAM was about on plan though their specialty DRAM business makes their sensitivity to pricing less significant and some may have looked for a bigger benefit. NAND units were up 40% with pricing down 20%.

They introduced a capex plan for 09 and its a doozy. They're saying they're going to spend $2.5 - $3.0 bil this year and 1.5 - 2.0 bil next. Sucks to be on the receiving end of that forecast if you're a semicap. Yet another reason to be negative on memory-heavy capex companies like LRCX, VSEA and MTSN.

Apple (AAPL) jiggles the supply chain, undulations follow

Citi says Samsung saw a large order cancellation from a major OEM in NAND -- pretty sure it's Apple in iPods. Yesterday there was a lot of talk about increased build plans on the iPhone in the channel, stirred up by a note from FBR.

iPods are still a pretty substantial portion of the mix. I would think ramping iPhones and ramping down iPods makes sense -- there's going to be cannibalization from the $199 (or free if you're in parts of Europe) iPhone. Apple looks like its going to $156 near-term.

Sandisk (SNDK) in the perfect storm

So I've hated Sandisk for a long time. Last quarter I said the stock belonged in the low 20s. It ran up to $33 instead on the notion that the co was being overly cautious and that Q2 would be the bottom for prod gross margins.

I'm a lot less negative on the stock at $20.

Right now you've got NAND contract down 25%, retail pricing terrible, the stock is clearly telegraphing they're going to miss estimates. Doesn't get a lot worse from a story perspective. I think the quarter is probably a miserable mess... but they kind of told us that would happen... and they've been saying all quarter that pricing isnt good, that retail is weaker.

It may still go lower but I'm wondering if the story is bad enough that it can get better from here.

Google (GOOG) could have a similar issue

Google's been talking about a lot of capital spending and higher opex putting pressure on margins since... well... forever. They were all talk until the last quarter, where it actually started to show up. Comscore's horrific data all through the March quarter led people to believe a miss was coming... so when they made numbers, the stock exploded higher. The fact is, though, Google mostly got there because of the currency translation benefits of their international business. My piece on their last quarter is worth re-reading.

The issues they had last quarter are likely to persist this quarter... the difference here is one of expectations. People were looking for RIMM to beat and raise guidance, so the stock got crushed on the margin shortfalls. People were looking for Google to miss so the stock exploded higher. I don't think people are looking for Google to miss anymore... and there were some alarming trends beginning last quarter. And when you get big like Google is getting, it's pretty tough to about face. Rising spending is likely to be an ongoing fact of life for them... and for shareholders.

I kind of imagine a conversation like this happening somewhere at the midday mutual fund research meeting today:

"What other stocks do we own that have very high growth rates and could be heading for a margin shortfall due to higher spending?"
"(gulp) Er I guess that could happen at Google too."
"Right. Start selling Google."

I'm short some.