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Richard Davenport
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Richard Davenport provides differentiated research utilizing supply chain analysis, as well as more traditional methods. He is a former sell-side analyst at Citigroup. In 2005 he founded Connexiti LLC, a market-leading provider of supply chain data, research, and analytics. While at Connexiti,... More
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  • Hon Hai: Normal Seasonality Neutral To Positive For Apple

    Hon Hai (2317.TW), the world's largest contract manufacturer and Apple's (NASDAQ:AAPL) biggest supplier, has reported July consolidated revenues of NT$248.69B (US$8.30B). The +5.01% M/M increase is essentially in line with a 10-year average of +5.80% (σ=9.89%).

    Hon Hai receives >40% of its revenues from AAPL, and accounts for a similarly large percentage of AAPL's COGS. As such, it is an important indicator of AAPL's revenue trends, as it manufactures the bulk of its iPhones and iPads, as well as Macs.

    Cirrus Logic (NASDAQ:CRUS) recently guided calendar Q3 revenues well above Street expectations, which suggested a new AAPL product (such as the much-rumored iPad mini) on the horizon, as CRUS provides the audio chip for all AAPL hardware.

    Hon Hai's results do not yet indicate a significant uptick in AAPL's business, but the normal seasonal strength in light of other deteriorating markets may suggest some better-than-seasonal AAPL strength.

    Typical seasonality for Hon Hai's August quarter would be +3.92%, followed by September at +17.71%; we'll continue to monitor the supply chain data as it becomes available.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: AAPL
    Aug 10 8:39 AM | Link | Comment!
  • Quanta: Solid Start To Q3 PC Supply Chain

    Quanta Computer (2382.TT), the world's largest notebook ODM, reported July consolidated revenues of NT$87.88B (US$2.93B), down -1.15% M/M, and up +17.65% Y/Y. The -1.15% M/M decline compares favorably to a 10-year seasonal average of -4.27% (σ=8.29%). July's results mark the 3rd consecutive month that Quanta has reported revenue growth above seasonal norms on a M/M basis, following four consecutive months of reporting revenue growth below seasonal norms. The better-than-seasonal results also compare favorably to published market expectations of a -10% M/M decline.

    The next three months (August, September, and October) are important for notebook back-to-school and Christmas build indications; these months rank 5th, 4th, and 2nd, respectively, among the other months of the year in terms of seasonal M/M revenue growth. If Quanta reports August and September M/M revenue growth only in line with seasonal norms (+5.90% and +11.79%, respectively), then its Q3 revenues would amount to NT$285B (US$9.51B). This would represent Q/Q revenue growth of +24.25%, well above a 10-year average of +9.45%. Thus Quanta has "cushion" to report below-seasonal growth in August and September, and still report a seasonally normal Q3 -- or else is on track to report a stronger-than-normal Q3.

    With today's concerns about inventories and macroeconomic data, Quanta's positive results are all the more meaningful, and are a strong indicator of actual downstream demand. Hewlett-Packard (NYSE:HPQ) has historically been its largest customer, accounting for roughly 40% of revenues. Apple (NASDAQ:AAPL) is a strong customer as well.

    Because it is the world's largest notebook manufacturer, Quanta's results are an incremental positive data point for upstream PC supply chain names such as Intel (NASDAQ:INTC), Advanced Micro Devices (NASDAQ:AMD), Nvidia (NASDAQ:NVDA), Seagate (NASDAQ:STX), Western Digital (NASDAQ:WDC), and Micron (NASDAQ:MU), as well as major customers Hewlett Packard , Apple , and Dell (NASDAQ:DELL), among others. Major competitor Compal (2324.TT) has yet to report July revenue; strength there could confirm the positive trend, or weakness may counterbalance Quanta's strength for the PC supply chain at large. We'll report that data as soon as it's available.

    Disclosure: I am long AAPL.

    Aug 08 2:18 PM | Link | 1 Comment
  • One Way To Play AMAT's Warning

    From a supply chain perspective, UCTT receives ~36% of its revenues from AMAT, which warned this morning. UCTT has a long relationship with AMAT, which has been its largest customer for years.

    Disclosure: I am short UCTT.

    Tags: UCTT, amat
    Jul 10 10:26 AM | Link | 1 Comment
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