Infosys Earnings Preview: Expect a Comfortable Earnings Beat [View article]
Results are out and here's the tally:
My Projections Actuals
Revenues $1.27-28B $1.29B Op. Profit $370M $390M Profit Before Tax $440M $445M Net Income atleast $347M $349M EPS 0.62-0.64 0.61
Guidance of 16-18% revenue growth in FY11 is as expected. Surely growth is back for IT services and we can expect a good FY2011 for Indian IT services.
They have announced nothing in terms of special dividends etc and the annual dividend is minuscule,in my view. The cash pile is becoming bigger with cash and marketable securities at $3.5B. Wonder if this is not reducing shareholder value or does INFY believe that it can act as the shareholder's cash manager!!!
Are Semiconductor Valuations Peaking? [View article]
Yes. but even the operating margins considered should not be the latest but an average. typically most firms will have cycles of impairment/restructuring charges in this industry group and latest margins might be skewed as a result(same goes for P/E as well)
Are Semiconductor Valuations Peaking? [View article]
Burnintoo,
Historical Mcap/sales ratios cannot be compared directly with current Mcap/sales ratio simply because for these companies, revenues and Mcap will be very volatile, which is why I have taken average sales during 2005-09 to compute the ratio. Also my other argument is that grow in sales/profits in this cycle(2009-2013/14) will not match the average profits/sales during 2005-09 and so these stocks cannot be viewed as growth stocks( which can have a Mcap/average sales ratio of 3.0). Stable or cyclical stocks, in my opinion should have Mcap/sales ratio of 2, and so AMAT could be more attractive compared to others in the table.
Synopsys Guidance Indicates Unlikely Growth in IC Design Starts [View article]
MENT(Mentor) had a change of Fiscal year in 2008 and so comparable fiscal data and historical quarterly data was not readily available.Else, I would have surely taken Mentor data for comparison.
Anyway the idea was to compare to a few peers and not ALL. There are other competitors like Ansys(by virtue of its Ansoft acquisition) too but getting EDA specific revenues was difficult in such cases.
Yes. Not all Tech stocks are good and for stock-picking company fundamentals are important in the current scenario of expensive valuations. Please see my earlier article on STEC and the interesting comments on the article : seekingalpha.com/artic...
Leverage and China's Property Market [View article]
Very Interesting read. Ultimately to me the realization is that when supply>>>dema... demand and not speculative demand) and Price increases in this scenario it is a bubble. This goes for apartments, commodities or even stock. The dot-com bubble was created because at some point the supply of paper(equity) was far greater than demand(Investor appetite) and yet people kept buying such stocks at higher and higher values with no botheration of demand/supply and relative supply(companies in other sectors with much much better cash flows) at far cheaper valuations. The seller kept 'marketing' a scenario of limited supply and as long buyers believed it, they bought.
Another interesting point is the importance of 'cash flows' rather than just plain asset value which can be misleading to an investor as has happened in the real estate bubble.
STEC: Shareholder Lawsuits Point to Larger Problems [View article]
Augusto Solar,
You have some very valid points but I do differ on certain points.
1.STEC was not just a $100M company till mid-2009. Please check its market caps in 2007/08 and even in 2003(prior to and after its previous secondary offering) and its no where close to the $100M that you claim. Also to remind you, STEC has been listed for a decade now and is not a recent IPO . So your numbers itself are wrong.
2.As per Reuters estimates, consensus for Q4 revenue estimate was$107M while they guided for $101-103(median of 102 is 5% lower). So even if you are referring to a different set of estimates, I'm not sure it was not below estimates(please quote your source and what was the estimate). Else even this claim of not being below estimates is wrong.
Some other numbers which could also be useful to form an opinion on 4Q09 revenues for STEC(all numbers from the company's own filings):
3.They have already billed $54M in 3Q to EMC as part of this $120M agreement(refer Nov09 10Q). So that leaves around $76M to bill as per this agreement in 4Q09 as the agreement was for 2H09. This means that if STEC supplies EMC as per plan, ~75% of its revenue would have come from a single customer in the next quarter-4Q09. The revenue concentration of EMC will therefore increase from 54% in 3Q09(again refer Nov10Q) to 75% in 4Q09(if things go as per the EMC agreement). Back-calculating from this, non-EMC customers gave ~$44M rev in 3Q09($98 of total rev-$54M from EMC). In 4Q09, that is expected to drop to $ 27 M if we go by their guidance ($103M is upper end of rev guidance-76M is expected contribution from EMC ). So is that good or bad? If as per the Nov con. call, EMC is on track, what happened to other customers then? why is their "absolute" billings from STEC going down from 3Q to 4Q?
I'm happy to have a fact based discussion as that increases everybody's understanding of STEC as a company
STEC: Shareholder Lawsuits Point to Larger Problems [View article]
Mark,
There were no questions raised on Dan. Rather the Chariman/CEO should be worried that they have had no new board appointments and the only two new appointments for a long time were due to the previous board members resigning for less than pleasant reasons. A regular churn of 'external' directors(and not an insider becoming a non-executive director) is good for a company that aspires to be in the top league.
With regards to the SEC correspondence, I don't accept STEC's argument that the EMC contract is not material. It is a $120M contract for a company which $228M in revenues in 2008. And STEC had mentioned that most of this contract was to be fulfilled in second half of 2009 as the title of its press-release on its own website suggests:
"STEC Signs a $120 Million Supply Agreement for ZeusIOPS SSDs for 2H 2009 and Now Forecasts Sales of ZeusIOPS SSDs to Exceed $220 Million in 2009"(PR dt.July 16,2009)
On Dec 30 03:00 PM MarkLSmith wrote:
> It's amazing that the author would slam Dan Moses in a fashion like > this. The guy worked at STEC longer than anyone outside of the three > founders. To imply that there's some level of deception dating back > to 1992 is completely ludicrous. > > Also, you might want to read the SEC correspondence dated Oct. 13th, > 2009. It's a much better explanation of the EMC disclosure issue > from the company's perspective: > www.sec.gov/Archives/e...
STEC: Shareholder Lawsuits Point to Larger Problems [View article]
To All Readers, I have highlighted certain 'areas' of concern in STEC and at the same time clearly mentioned that financial performance has been good and compares favorably with the best of Tech small-caps. This by no means is a recommendation(good or bad).
Some additional information that I gathered on STEC:
1.STEC (called SimpleTech 2-3 years ago) had a secondary offering in Oct 15,2003( see link here : studio-5.financialcont...) where STEC offered 10M shares of which the company management(selling shareholders) was offering 2.5M shares(excluding underwriter options). In Oct2003, STEC shares were at or close to their life-time high of $10 at that point and shares in this secondary sale were priced at $7. For the better part of 2003, STEC shares were in the $3-5 range. But we have to admit that STEC was in a volatile market then(memory) and so wild swings in stock prices could be expected. However, their timing for the secondary offering was spot-on then and even now!!!
2.Another issue with the Board composition was more related to 'how' independent were the non-executive directors. Granted that Mr.Dan Moses is a non-executive director as of now. But even in the past(again in 2003-04), a independent director, Mr.Thomas Beaver became a executive to run a division(Xirian) which was subsequently closed and the investment of ~$3.5M written off. In fact after the stock offering in Oct03, in Jun04, it announced the closure of Xirian and also lowered revenue guidance which resulted in the stock tanking again to the $3-4 range. The next trigger was in third quarter of 2006 where it again reached double digits after it announced a stock repurchase program and revenues also picked up.
Success Factors: Going for Break-Even Rather than Revenue Growth? [View article]
In my opinion, it is definitely an acquisition candidate...but not necessarily for the big players(IBM/HP/Cisco etc) only. It would be a nice fit even for IT services folks like Accenture/Infosys as a productized service is a good fit for pure-play IT services
On Dec 20 01:15 AM User 381292 wrote:
> I like the article and all the points made. > Question- is SFSF a qood acquisition candidate for any of the big > players?
Tech Sector: Does R&D Spending Matter? [View article]
Gaga,
You are right. This was exactly my thought when I was writing this article. How do we differentiate between Research $'s spent and development $ spent(for upgrades etc which is not really 'Research'). But that look's very difficult. hence my attempt to see how effective are R&D spends by trying to link it to size of company, revenue growth in times of downturn etc.
On Nov 12 01:54 PM gaga555 wrote:
> Having worked at one of the companies that made the list, I can tell > you that this is a completely flawed analysis. It does not take > into account how efficient those R&D dollars are nor what specifically > the spending is on. There is R&D spend that is sustaining engineering > and there is R&D spend that is actual innovative R&D. I > know of companies with relatively high R&D that are not innovators > at all. In addition, for tech companies that consistently acquire, > much of their growth in R&D spending can be attributed to taking > on the inorganic expense growth in R&D from adding the expense > of the acquired company and often supplementing that expense as they > pour more money into that technology and try to bring it to market. > Sorry, but you would have to look individually at companies that > launch new products and segments through internal projects, and that > is not easy to compile.
Solid Execution Makes Western Digital a Compelling Stock [View article]
I guess you had positions in WDC a while ago. For the last year or so, I have consistently been surprised at how good WDC's results are and yet its hardly spoken about!
Accenture: Why This Revenue Leader Is Not the Leader by Market Value [View article]
I have included marketcap and operating profits/margins specifically for that. I'm only trying to interpret the market's call on this group by supplying facts. I also believe that the next two quarters(Sep/Dec09 qtr) will narrow the profitability gap of INFY/WIT with Accenture and so the market's 'premium' valuation for INFY/WIT may be partially justified...not fully though.
On Oct 06 10:27 AM longyield wrote:
> What you also fail to mention is that ACN is much cheaper than INFY > or WIT. Although its implied in your comparison of market cap and > revenue you don't make the point that INFY and WIT are incredibly > overvalued relative to ACN. You focus on operating margins but you > should really look at FCF margin and ROCE. INFY trades at 26x FCF, > ACN trades at 8x. So INFY may grow more than ACN in the future but > the market has already priced that in. Long INFY was a good call > a few months ago but I would be surprised if there is anymore "alpha" > left in that trade.
Accenture: Why This Revenue Leader Is Not the Leader by Market Value [View article]
Well despite all this if Infosys and Wipro make more margins than Accenture(and not for one quarter but for the last five years!!!), then as an investor I would still go with Infosys/Wipro. Seriously, clients should give more contracts to Accenture than INFY/Wipro as per your experience but that has not happened in the last five years!!!
In fact that is the curx of my article, If I may add
On Oct 06 08:33 AM Gravity404 wrote:
> From a client POV. I have worked with ACN, INFY, WIT. > > What you fail to mention here is that INFY and WIT take twice as > long to do half the work. Then the amount of time it takes to have > another company redo their work. How do you account for that on a > balance sheet? > > Oh yeah, then there is the Satyam accounting methods to consider....
Infosys Earnings Preview: Expect a Comfortable Earnings Beat [View article]
My Projections Actuals
Revenues $1.27-28B $1.29B
Op. Profit $370M $390M
Profit Before Tax $440M $445M
Net Income atleast $347M $349M
EPS 0.62-0.64 0.61
Guidance of 16-18% revenue growth in FY11 is as expected. Surely growth is back for IT services and we can expect a good FY2011 for Indian IT services.
They have announced nothing in terms of special dividends etc and the annual dividend is minuscule,in my view. The cash pile is becoming bigger with cash and marketable securities at $3.5B. Wonder if this is not reducing shareholder value or does INFY believe that it can act as the shareholder's cash manager!!!
Are Semiconductor Valuations Peaking? [View article]
Are Semiconductor Valuations Peaking? [View article]
Historical Mcap/sales ratios cannot be compared directly with current Mcap/sales ratio simply because for these companies, revenues and Mcap will be very volatile, which is why I have taken average sales during 2005-09 to compute the ratio. Also my other argument is that grow in sales/profits in this cycle(2009-2013/14) will not match the average profits/sales during 2005-09 and so these stocks cannot be viewed as growth stocks( which can have a Mcap/average sales ratio of 3.0). Stable or cyclical stocks, in my opinion should have Mcap/sales ratio of 2, and so AMAT could be more attractive compared to others in the table.
Synopsys Guidance Indicates Unlikely Growth in IC Design Starts [View article]
Anyway the idea was to compare to a few peers and not ALL. There are other competitors like Ansys(by virtue of its Ansoft acquisition) too but getting EDA specific revenues was difficult in such cases.
Tech Profits Zoom [View article]
Leverage and China's Property Market [View article]
Another interesting point is the importance of 'cash flows' rather than just plain asset value which can be misleading to an investor as has happened in the real estate bubble.
STEC: Shareholder Lawsuits Point to Larger Problems [View article]
You have some very valid points but I do differ on certain points.
1.STEC was not just a $100M company till mid-2009. Please check its market caps in 2007/08 and even in 2003(prior to and after its previous secondary offering) and its no where close to the $100M that you claim. Also to remind you, STEC has been listed for a decade now and is not a recent IPO . So your numbers itself are wrong.
2.As per Reuters estimates, consensus for Q4 revenue estimate was$107M while they guided for $101-103(median of 102 is 5% lower). So even if you are referring to a different set of estimates, I'm not sure it was not below estimates(please quote your source and what was the estimate). Else even this claim of not being below estimates is wrong.
Some other numbers which could also be useful to form an opinion on 4Q09 revenues for STEC(all numbers from the company's own filings):
3.They have already billed $54M in 3Q to EMC as part of this $120M agreement(refer Nov09 10Q). So that leaves around $76M to bill as per this agreement in 4Q09 as the agreement was for 2H09. This means that if STEC supplies EMC as per plan, ~75% of its revenue would have come from a single customer in the next quarter-4Q09. The revenue concentration of EMC will therefore increase from 54% in 3Q09(again refer Nov10Q) to 75% in 4Q09(if things go as per the EMC agreement). Back-calculating from this, non-EMC customers gave ~$44M rev in 3Q09($98 of total rev-$54M from EMC). In 4Q09, that is expected to drop to $ 27 M if we go by their guidance ($103M is upper end of rev guidance-76M is expected contribution from EMC ). So is that good or bad? If as per the Nov con. call, EMC is on track, what happened to other customers then? why is their "absolute" billings from STEC going down from 3Q to 4Q?
I'm happy to have a fact based discussion as that increases everybody's understanding of STEC as a company
STEC: Shareholder Lawsuits Point to Larger Problems [View article]
There were no questions raised on Dan. Rather the Chariman/CEO should be worried that they have had no new board appointments and the only two new appointments for a long time were due to the previous board members resigning for less than pleasant reasons. A regular churn of 'external' directors(and not an insider becoming a non-executive director) is good for a company that aspires to be in the top league.
With regards to the SEC correspondence, I don't accept STEC's argument that the EMC contract is not material. It is a $120M contract for a company which $228M in revenues in 2008. And STEC had mentioned that most of this contract was to be fulfilled in second half of 2009 as the title of its press-release on its own website suggests:
"STEC Signs a $120 Million Supply Agreement for ZeusIOPS SSDs for 2H 2009 and Now Forecasts Sales of ZeusIOPS SSDs to Exceed $220 Million in 2009"(PR dt.July 16,2009)
On Dec 30 03:00 PM MarkLSmith wrote:
> It's amazing that the author would slam Dan Moses in a fashion like
> this. The guy worked at STEC longer than anyone outside of the three
> founders. To imply that there's some level of deception dating back
> to 1992 is completely ludicrous.
>
> Also, you might want to read the SEC correspondence dated Oct. 13th,
> 2009. It's a much better explanation of the EMC disclosure issue
> from the company's perspective:
> www.sec.gov/Archives/e...
STEC: Shareholder Lawsuits Point to Larger Problems [View article]
I have highlighted certain 'areas' of concern in STEC and at the same time clearly mentioned that financial performance has been good and compares favorably with the best of Tech small-caps. This by no means is a recommendation(good or bad).
Some additional information that I gathered on STEC:
1.STEC (called SimpleTech 2-3 years ago) had a secondary offering in
Oct 15,2003( see link here : studio-5.financialcont...) where STEC offered 10M shares of which the company management(selling shareholders) was offering 2.5M shares(excluding underwriter options). In Oct2003, STEC shares were at or close to their life-time high of $10 at that point and shares in this secondary sale were priced at $7. For the better part of 2003, STEC shares were in the $3-5 range. But we have to admit that STEC was in a volatile market then(memory) and so wild swings in stock prices could be expected. However, their timing for the secondary offering was spot-on then and even now!!!
2.Another issue with the Board composition was more related to 'how' independent were the non-executive directors. Granted that Mr.Dan Moses is a non-executive director as of now. But even in the past(again in 2003-04), a independent director, Mr.Thomas Beaver became a executive to run a division(Xirian) which was subsequently closed and the investment of ~$3.5M written off. In fact after the stock offering in Oct03, in Jun04, it announced the closure of Xirian and also lowered revenue guidance which resulted in the stock tanking again to the $3-4 range. The next trigger was in third quarter of 2006 where it again reached double digits after it announced a stock repurchase program and revenues also picked up.
Success Factors: Going for Break-Even Rather than Revenue Growth? [View article]
On Dec 20 01:15 AM User 381292 wrote:
> I like the article and all the points made.
> Question- is SFSF a qood acquisition candidate for any of the big
> players?
My Hardware Picks: More Value, Less Glamour [View article]
On Dec 14 10:21 AM TraderMark wrote:
> just fyi STAR in acqusition by CSCO
Tech Sector: Does R&D Spending Matter? [View article]
You are right. This was exactly my thought when I was writing this article. How do we differentiate between Research $'s spent and development $ spent(for upgrades etc which is not really 'Research'). But that look's very difficult. hence my attempt to see how effective are R&D spends by trying to link it to size of company, revenue growth in times of downturn etc.
On Nov 12 01:54 PM gaga555 wrote:
> Having worked at one of the companies that made the list, I can tell
> you that this is a completely flawed analysis. It does not take
> into account how efficient those R&D dollars are nor what specifically
> the spending is on. There is R&D spend that is sustaining engineering
> and there is R&D spend that is actual innovative R&D. I
> know of companies with relatively high R&D that are not innovators
> at all. In addition, for tech companies that consistently acquire,
> much of their growth in R&D spending can be attributed to taking
> on the inorganic expense growth in R&D from adding the expense
> of the acquired company and often supplementing that expense as they
> pour more money into that technology and try to bring it to market.
> Sorry, but you would have to look individually at companies that
> launch new products and segments through internal projects, and that
> is not easy to compile.
Solid Execution Makes Western Digital a Compelling Stock [View article]
On Oct 27 12:01 PM Tom Armistead wrote:
> Went long WDC today.
Accenture: Why This Revenue Leader Is Not the Leader by Market Value [View article]
On Oct 06 10:27 AM longyield wrote:
> What you also fail to mention is that ACN is much cheaper than INFY
> or WIT. Although its implied in your comparison of market cap and
> revenue you don't make the point that INFY and WIT are incredibly
> overvalued relative to ACN. You focus on operating margins but you
> should really look at FCF margin and ROCE. INFY trades at 26x FCF,
> ACN trades at 8x. So INFY may grow more than ACN in the future but
> the market has already priced that in. Long INFY was a good call
> a few months ago but I would be surprised if there is anymore "alpha"
> left in that trade.
Accenture: Why This Revenue Leader Is Not the Leader by Market Value [View article]
In fact that is the curx of my article, If I may add
On Oct 06 08:33 AM Gravity404 wrote:
> From a client POV. I have worked with ACN, INFY, WIT.
>
> What you fail to mention here is that INFY and WIT take twice as
> long to do half the work. Then the amount of time it takes to have
> another company redo their work. How do you account for that on a
> balance sheet?
>
> Oh yeah, then there is the Satyam accounting methods to consider....