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  • How much can Netflix subscribers grow?
    Netflix revealed double-digit subscriber growth when it reported its Q3 2009 results last Friday.   The company also recently announced a partnership with Sony that will allow Netflix subscribers to stream videos to their TVs through a PlayStation 3 (PS3) gaming console.  We've updated the Trefis price estimate for Netflix slightly from $57.03 to $58.97 to reflect higher subscriber growth and more video streaming per subscriber than we had expected.

    Netflix reported an increase of 500,000 subscribers during Q3 resulting in total subscribers of 11.1 million.  The company is expecting 12 to 12.3 million subscribers by the end of 2009, implying at least 900,000 subscriber additions, primarily as a result of the PS3 partnership.  We've updated our Netflix Subscriber forecast to reflect 12 million subscribers by the end of the year since we believe that Netflix's subscriber forecast is already aggressive.

    We've also updated our forecast for the Number of Videos Streamed per Subscriber from 1 to about 1.2 as a result of the PS3 partnership and other potential partnerships with consumer electronics manufacturers.  Around 40-42% of Netflix subscribers have tried streaming (up from under 15% in the prior quarter) and a significant portion of them use it on a regular basis.  Netflix also announced plans to launch a streaming-only service in a few countries outside of the US.

    You can find additional detail on the update to our Netflix estimate here (scroll down to comments section).

    Disclosure: No positions
    Tags: NFLX
    Oct 27 12:45 PM | Link | Comment!
  • Virtual desktops will help EMC sell more storage hardware
    A recent article from the WSJ talked about how businesses, in a bid to squeeze out cost from their technology budgets, are increasingly choosing to purchase virtual desktops in place of buying desktop PCs.  We expect that a shift towards virtual desktops will help data storage providers like EMC sell more storage hardware which will be used to centralize the data delivered to virtual desktops.

    As described in the article, a virtual desktop is "essentially a set-up consisting of a screen, keyboard and small connector box that ties into a powerful server in the computer room that has all the software, storage and processing capabilities that each desktop user needs."

    The cost to businesses of purchasing virtual desktops, including supporting software and additional remote server and storage hardware, is comparable to the cost of purchasing desktop PCs.  Despite comparable up front costs, companies are expecting to realize savings using virtual desktops through reduced IT maintenance costs.  By eliminating the need for on-site software installations and by preventing users from installing unapproved software programs, businesses can reduce IT expenses while enhancing network security.

    We estimate that Storage Market (in Gigabytes) has gone from 2 billion GB in 2005 to about 11 billion GB today and this will increase to over 80 billion GB by the end of the Trefis forecast period.  Within EMC's content on our platform, you can see how the company's stock would be impacted if the Storage Market were to grow faster than expected due to the shift to virtual desktops.

    Disclosure: No positions
    Tags: EMC, VMW
    Oct 23 6:15 PM | Link | Comment!
  • Dish Network - Trefis price of $24.31, 25%+ upside to market price
    Trefis has launched coverage of Dish Network which provides satellite TV service in the US.  Dish makes money by charging its 14 million subscribers monthly subscription fees for its satellite TV service along with incremental charges for HD and DVR service.  Satellite TV service constitutes 70% of the $24.31 per share Trefis price for Dish.

    The company competes with other satellite, cable and telco pay TV providers such as DirecTV, Comcast, Time Warner, AT&T and Verizon.  Dish's market share amongst the 108 million US households that pay for TV service is about 13% today, up slightly since 2006.  Historically, Dish has benefited from its relationship with AT&T which helped Dish distribute its TV service to AT&T customers.  About 17% of Dish's new subscribers in 2008 were through AT&T.  However, AT&T is now partnered with Dish's satellite competitor DirecTV which disadvantages Dish at a time of increasing competition amongst satellite, cable and telco providers.  Bundling of services (TV, internet and phone) helps cable and telco operators attract users away from satellite providers which are limited to relationships with telcos to provide bundled services.

    We expect Dish's market share to suffer initially as a result of losing distribution through AT&T; however, we believe that Dish will be able to maintain share over the long-run.  Within Dish's content on our platform, you can see how Dish Network Pay TV Market Share impacts the company's stock price.

    Disclosure: No positions
    Oct 23 6:14 PM | Link | 1 Comment
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