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Robert McDonald  

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  • Is Intel Destined to Remain Only a Dividend Play? [View article]
    It should also be noted that Intel's CPU sales in server application is only 20% of overall sales whereas sales for PC applications represent greater than 60%.
    Jan 17, 2011. 11:50 AM | 1 Like Like |Link to Comment
  • Is Intel Destined to Remain Only a Dividend Play? [View article]
    Thank you for your comment. I have to agree with your points with one exception. All of the alternative ways of doing computing and alternative computing engines of various sorts, including mobile and tablets, are indeed going to erode some potential PC sales vs. what might have been, especially in laptops. Why carry around a relatively large power hungry laptop around when you can do something more easily and efficiently with a more mobile device. Also tablets are more easily configured to specific applications at lower cost, reliability and easy of use -- ala the FEDEX drivers hand carried machine for package tracking and customer signatures.

    Intel is going to have to hustle in ways it never has before to break even in this new market place. The good news, as you point out, is that the PC is not going away, especially as emerging markets keep up the demand for new machines. I also agree that there will be large demand for more servers to support mobile and corporate needs and Intel will remain the dominant player in the market for the foreseeable future.

    The bottom line however is that if one is looking for significant equity appreciation vs. just dividends, I would look elsewhere.
    Jan 17, 2011. 11:25 AM | 2 Likes Like |Link to Comment
  • Is Intel Destined to Remain Only a Dividend Play? [View article]
    Good suggestion -- thank you. Covered calls on the right stock can be a nice way to get some extra income.
    Jan 17, 2011. 10:16 AM | Likes Like |Link to Comment
  • Is Intel Destined to Remain Only a Dividend Play? [View article]
    The gentleman at Merrill Lynch who was issuing the negative calls on Intel back in the 80;s and 90's was Tom Kurlak. He was labeled as the top Intel analyst at the time, I loved it. He would open his mouth, the stock would go down and I would buy Intel long term calls called LEAPs -- it was a very nice deal.

    Remember just as money managers will buy stocks for the reasons that are not necessarily in their client's interest, analysts are employed by brokerage firms and their salary is based on the brokerage firm making money. Anyone who believes what an analyst is saying without doing their homework is taking a big risk.

    For those who believe lock everything their stock broker is telling them and think he is acting in their interest should do some homework via Google on what is called the "Merrill Rule". This rule was not named after Merrill Lynch for no reason at all.
    Jan 17, 2011. 10:12 AM | Likes Like |Link to Comment
  • Is Intel Destined to Remain Only a Dividend Play? [View article]
    TWO CLARIFICATIONS:

    1. The QCOM Snapdragon and the Nvidia Tegra mobile phone chipsets have incorporated the ARM Cortex CPU under license.

    2. AMD was licensed to use the X86 cpu design back in 286 days when Intel ran out of manufacturing capacity and needed more supply to keep customers happy. Unfortunately for Intel, the license was done in a sloppy way and AMD effectively received the right to make X86 CPU's indefinently. However since that time Intel has outstripped AMD's ability to stay at they cutting edge and they are now only competitive for certain specific applications.
    Jan 17, 2011. 10:05 AM | Likes Like |Link to Comment
  • Is Intel Destined to Remain Only a Dividend Play? [View article]
    Due disclosure: I should have mentioned that I am long in all of the companies mentioned in this comment but have lightened up significantly in Intel and Microsoft with more to go after MSFT's Dec quarter earnings report. This may be the last report before the affect of the changing marketplace begins to degrade their margins.
    Jan 16, 2011. 04:02 PM | 2 Likes Like |Link to Comment
  • Is Intel Destined to Remain Only a Dividend Play? [View article]
    Oh boy! What a lot of folks don't seem to be aware of is that Intel's incursion into mobile undercuts the high profit margins on their proprietarycomplex high transistor count CPU's (see more commentary below). As Microsoft loses its dominance, this will also undercuts the demand for these complex high transistor count microprocessors. This is likely to mean that what they do well and have been able to keep proprietarty to them will no longer command the premium prices that have kept their earnings so high and so dependable.

    Compounding Intel's problem is the fact that their efforts to diversify from this dependence over the last 20 years has been a dismal failure -- 20 years later they are still in the same boat.

    I believe that there is a good reason why these diversification efforts have had so much difficulty. Intel is unbelievably competent and disciplined at what they does well: designing complex high quality reliable CPU's and making them with a manufacturing machine they have engineered to very high yields and high productivity.

    However when they get involved in areas outside of their areas of competence, this success gets in their way in way.

    In new endeavors, my exposure to Intel tells me that they tend to rely too heavily on internal "experts" vs. experts in the fields they are trying to break into or the companies they acquire. It is very hard for them to support and be open to other ways of doing things and also to maintain a culture of entrepreneurship at this point in time. Intel Capital, Intel's venture arm where a lot of new opportunities should come from, tends to suffer from this problem as well.

    Intel's moat and unique core competence is in the proprietary manufacture of high ASP (average selling price), high margin, complex X86 microprocessers with 500 million plus transistors. No other manufacturer is allowed to duplicate or sell the product. The good news is that all the huge server farms that must be built to support migration to the cloud and the mobile internet will require these kinds of CPU's indefinitely. At this point in time this is also a large enterprise upgrade to Microsoft's Window 7 in process which is driving a lot of PC purchases however it is not clear that there will another such upgrade in the foreseeable future. In addition there is a lot of the world that still needs PC proliferation or upgrades (China, especially Middle Western China with >2X more population than the United States is a case in point). So this will hold up Intel's earning power at the current level for some point in time, but not indefinently.

    Even if Intel had a cutting edge mobile device which it does not, the ARM processor along with Apple's proprietary CPU, currently run the majority of mobile and tablet devices. The latter is already undercutting some PC sales.. The ARM processor has less than 50 million transistors, a factor of 10 less complexity than X86 processors and It has been licensed for manufacture by many semiconductor companies. It is sold with a correspondingly low average selling price or ASP. The Intel Atom processor, designed for mobile applications and to compete with ARM, has 47M transistors count and cannot command Intel's usual premium prices. Every Atom CPU that Intel sells potentially competes with or undercuts X86 sales and is a significant potential earnings loss to Intel.

    If that were not enough, the problem is going to get a lot stickier with other very competent companies with great track records adding to the mix. QCOM has its Snapdragon CPU running in cutting edge Android phones, Nvidia's Tegra mobile CPU has promise and Nvidia has now teamed up with ARM for even more powerful devices using their formidable joint core competencies. In addition Broadcom will be introducing an all in one mobile chip with CPU in 2011.

    All of this presents major challenges to Intel's bottom line in the short term and moreso in the longer term. This is not a good situation and is why the stock is currently frozen in place. It remains to be seen how Intel will deal with this problem.
    Jan 16, 2011. 03:35 PM | 11 Likes Like |Link to Comment
  • Just One Stock: Unloved Shares with Hidden Values on Balance Sheet? Yahoo! [View article]
    PS: Alibaba is also working with local shippers in China to facilitate badly needed improvements in China's primitive package delivery system -- who knows (my speculation) they may even team with others like FDX or UPS and faclitate their entry or start their own shipping company. This would open up yet up anotherhigh growth revenue opportunity for the Alibaba investment group.
    Jan 15, 2011. 11:04 PM | Likes Like |Link to Comment
  • Just One Stock: Unloved Shares with Hidden Values on Balance Sheet? Yahoo! [View article]
    There are some misleading statements in this article that might effect your investment decisions. First of all Alibaba is a publicly traded pink sheet stock (ALBCF -- see Marketwatch or Google Finance). Yahoo has a 40% ownership stake in the ALIBABA private investment group which was purchased on August 10, 2005. The Alibaba group owns:

    Alibaba.co - publicly traded company in e-commerce for small businesses
    Taobao.com - online retail marketplace
    Alipay - third-party online payment platform
    Alibaba Cloud Computing - advanced data-centric cloud computing services platform
    China Yahoo!
    Alibaba UK - a online retail marketplace specifically for UK buyers
    AliExpress - an international online wholesale platform for smaller buyers.

    I believe the Alibaba Group is a great China Internet play and it has not been discovered and driven to very high P/E's like BIDU. This stock is a relatively undiscovered China internet play.

    Another such play is NASPERS (NPSNY also pink sheet traded) that owns a 32% stake in Tencent, the largest Chinese internet company by Market Cap. NASPERS also has a 29 % ownership stake in DIGITAL SKY (DST), which is about to go IPO and has a stake in Facebook. NASPERS also happens to be a play on Africa -- check it out at the last web links on this page.

    FOR MORE INFORMATION ON ALIBABA SEE:

    "China's king of e-commerce
    Jack Ma knows as much as anyone about how China’s middle class spends its money. What will he do with this information?"
    AlibabaDec 29th 2010 | HANGZHOU |
    www.economist.com/node...

    Also see the Wikipedia writeup:

    en.wikipedia.org/wiki/...

    FOR MORE INFORMATION ON NASPERS SEE THE FOLLOWING ECONOMIST ARTICLE:
    :
    "The emerging online giants
    DST, Naspers and Tencent have made promising internet investments in many emerging markets. Now even Western internet financiers are emulating them "

    www.economist.com/node...

    DUE DISCLOSURE: Long on NASPERS and the Alibaba Group.
    Jan 15, 2011. 10:45 PM | 2 Likes Like |Link to Comment
  • Earnings Preview: Citigroup, Charles Schwab, IBM and Apple [View article]
    I would estimate that Apple's December quarter earnings could be as high as $6.50/share, or 20-30% above what the professional market analysts are currently saying. My calculation is based on using the simple assumption that Q1 will be up at least 40% vs. Q4 2010. This is a conservative estimate versus the Q1 2010 to Q4 2009 comparison in which earnings per share were up 37%. Why is this estimate conservative? The Q1 '09 to Q1 '10 quarter to quarter gain did not have the iPAD contribution, the many worldwide product roll outs that have occurred since then nor does it allow for increasing enterprise sales (business vs. consumer) success.

    Using a forward average run rate of $6.50 per quarter and a very conservative price to earnings ratio of 20 to 1, the stock just might go to $520 per share in the next 12 months, or $100 or about 25% above the current Goldman Sachs estimate. This of course ignores the likelihood that Apple will continue to grow its earnings over Fiscal 2011 at a rate that it has in the last couple of years.

    2011 growth engines with significantly increasing momentum include the Verizon iPhone, the totally new IPAD product that everyone is trying to emulate, Apple's penetration into the enterprise and it's increasing sales worldwide, particularly in Asia. This ignores the new North Carolina server farm and possible new cloud computing initiatives that you have to believe that Apple must be thinking about.

    Disclosure: I am long AAPL
    Jan 15, 2011. 09:28 PM | 4 Likes Like |Link to Comment
  • Absurdly Overvalued: If Facebook's Worth $50B Then Apple's Worth $1.4T [View article]
    PS: Just because Goldman Sachs is involved in something, it does not mean it is a good deal for you. What you can count on is the fact that they have figured out that it is a good deal for them and beleive that you can be made to think it is a good deal for you. Buyer beware. OK short term yes, at least in this case, longer term when substance is required for the long haul, look out.

    In any case, Facebook is not my kind of investment. I am pretty happy with my APPL 2012 LEAPs and my Finisar options (LEAPS are not currently available on Finisar). The outcome is lot more certain in both cases and there is no need to wait for some pretty nice returns.
    Jan 10, 2011. 10:39 PM | 2 Likes Like |Link to Comment
  • Absurdly Overvalued: If Facebook's Worth $50B Then Apple's Worth $1.4T [View article]
    Regarding Facebook, didn't Yahoo have a lot of users and the highest page views at one time?
    Jan 10, 2011. 10:24 PM | 1 Like Like |Link to Comment
  • Absurdly Overvalued: If Facebook's Worth $50B Then Apple's Worth $1.4T [View article]
    It is entirely possible that Facebook is the largest Fad that the world has ever seen but a Fad never the less. Fads like Crispy Cream have a way of becoming mundane things we all take for granted and stop talking about. I remember the Big Donuts in LA growing up in the 50's. They had this brown plaster donut on top of their stores that was about 3 stories tall so you could not miss them -- their donuts were every bit as good as Crispy Cremes. The only real moat that Facebook has is its early to market position and its 500M users. Yes that is a lot of users and some version of Facebook will probably be around forever but users are fickle. It would only take another Fad to induce a significant migration. I don't think I will be buying Facebook stock.
    Jan 9, 2011. 11:17 AM | 12 Likes Like |Link to Comment
  • Microsoft: Cloud Computing Won't Add Great Value [View article]
    Cloud computing is much bigger than data accessibility. It means that a lot of computing functions that would have normally been carried out on an expensive, high overhead, high maintenance, complex microprocessor based, fixed location PC can now be done using the very latest computer tools on a portable mobile device any place there is connectivity. This not only makes computing portable but frees the enterprise and the consumer user from all the overhead associated with the PC alternative. PC's of course are not going away -- there will just be a lot fewer of them and they will be a lot less busy than they have been. The mobile internet already has a lot going on in the cloud using this broader computing model and this of course includes Apple.
    Jan 4, 2011. 10:19 AM | 1 Like Like |Link to Comment
  • Apple: Optimistic Analysis Illustrates What's Wrong With Typical Investment Approach [View article]
    My simplistic estimate of Apple's December quarter earnings is $6.50/share, 24% above what the professional market analysts are currently saying. My calculation is based on using the simple assumption that Q1 will be up at least 40% vs. Q4 2010. This is a conservative estimate versus the Q1 2010 to Q4 2009 comparison in which earnings per share were up 37%. Why is this estimate conservative? The Q1 '09 to Q1 '10 quarter to quarter gain did not have the iPAD contribution nor does it allow for increasing enterprise sales (business vs. consumer) success.

    Using a forward average run rate of $6.50 per quarter and a very conservative price to earnings ratio of 20 to 1, the stock can be expected to go to $520 per share in the next 12 months, $100 or about 25% above the current GS estimate. This of course ignores the likelihood that Apple will continue to grow its earnings over Fiscal 2011 at a rate that it has in the last couple of years.

    We do need to be aware that 2011 will cause the need to go to significant new ground. Apple's market cap, now at approximately $300B is likely to go up over 30% and become larger than Exxon Mobile which is currently at $368B and is the largest market cap company traded in the United States. This will make some investors even more nervous about whether this kind of growth can be sustained, even though the stock remains at relatively low valuations with a PEG of less than one.

    I am not in favor of Apple paying a dividend with all their cash or buying Netflix for example (the latter will not happen), but I am in favor of them spending some of their cash building server farms around the world at about $1B a crack to support their cloud initiatives, and maybe those of others. This is one of a number of ways that they can continue their remarkable innovation and business growth. This will position them in a stronger competitive position in the enterprise world (business) as more business computing moves to the cloud, as well as position enable worldwide distribution of movies and videos, other mobile support of all kinds as well as enable music sales around the world. There is no reason that this cannot include locally generated media and support their innovations in the home entertainment system which also must becoming. It should be noted that the cloud simply provides opportunity beyond their existing business lines and expands the ones they have -- it is a net add.

    On that note, you have to believe that Apple must be working on a home entertainment system where one box does all with the possible exception of providing the video monitor and speakers which can best be done by others. The existing Apple TV box is simply an entry point. I would imagine that this box could control all entertainment functions with an iPAD like device. I would love to finally be able to send all those remotes and all the extra wiring to the recycling station.

    I am also in favor of their doing a stock split which I would like to believe will occur 2011. Albeit it is a strictly psychological change, it will allow a few more investors to think it is cheaper and that they can buy now.

    This and other business opportunities are how Apple exceeds Exxon Mobile's market cap and becomes the largest market cap company traded in the United States. It is also how Apple may become a $1000 stock (pre-split valuation).
    Jan 4, 2011. 12:01 AM | 3 Likes Like |Link to Comment
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