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  • Micron And SanDisk: A Tale Of 2 Memory Companies [View article]
    Russ - great article, and a perfect complement to my article from earlier today also supporting MU

    fldgewinkle - good luck on the bet on memristors. New disruptive technologies have been predicted for the last decade, ain't happening here. The biggest problem the memory industry has faced historically is aggressively adding capacity to blow itself up just when times are getting good. This time, there is not enough motivation (Samsung helps handset/compute/smartp... competitors by adding memory capacity), capital, ease of technology improvement, or competition (oligopoly!) to ruin it...good times ahead.
    May 28, 2013. 09:53 PM | 1 Like Like |Link to Comment
  • Micron: The Prime Beneficiary Of The War Between Apple And Samsung [View article]
    Russ - absolutely agree with your analysis. In my view, we are on the verge of tightness, extending lead times, shortages, reminiscent of late '99 - except this cycle isn't built on pipe dreams. The one potential short-term hiccup is the potential (likelihood) that all the smartphone/tablet guys overbuild in 3Q/4Q and there is a massive inventory overhang in 1Q. However, given that most of the OEMs have very solid balance sheets, they would likely toss product that fails to sell off a cliff or burn it, and just come back with new models in '14. The smartphone/tablet units WILL grow again in '14 (not to mention demand for SSDs, new applications...hmmm wearable computing?), but it seems implausible that DRAM/NAND capacity adds will keep up. Russ - if you haven't looked at IMOS, worth your time as well.
    May 28, 2013. 02:14 PM | 1 Like Like |Link to Comment
  • Citi's Glen Young is raising fresh gross margin concerns about Apple (AAPL +0.1%), which is trading near breakeven on an up day for tech. Yeung, who cut Apple to Neutral last December and issued another downbeat note last month, sees margins pressured by the arrival of a cheaper iPhone and a "sub-$250 iPad Mini," as well as an iPhone mix shift towards older models. Apple is guiding for its gross margin to fall to 36%-37% in FQ3 from 37.5% in FQ2 (-990 bps Y/Y), as lower revenue and mix offset a drop in component costs. (more margin commentary: Horace Dediu, Gene Munster, Wells Fargo/BMO[View news story]
    Margins will also be hit by rising commodity component costs i.e .MDRAM and NAND in our opinion Samsung's slower capacity adds is doing Apple no favors.
    May 28, 2013. 01:10 PM | 1 Like Like |Link to Comment
  • Micron: The Prime Beneficiary Of The War Between Apple And Samsung [View article]
    I think you are missing much of the point. Sandisk will also be a beneficiary - our optimism regarding MU is not to the exclusion of Sandisk. The point is NOT that Samsung won't be supplying Apple any more, and therefore MU benefits - although I'd point you to this - Elpida is a MASSIVE MDRAM supplier to Apple. It is that Samsung realizes that competitively it is far more beneficial not to chase memory market share than it was historically. By not chasing market share, competitors see cost components rise, while Samsung's fall. We believe Sandisk is more capacity constrained than MU and is far closer to peak margins. MU has more to gain, and the positive impact of ASPs on Elpida is not sufficiently baked into sellside or (more aggressive) buyside models. Is SNDK also a long - yes. Is MU a bigger long, definitely.
    May 28, 2013. 09:49 AM | 4 Likes Like |Link to Comment
  • Volterra: Great Value With Short-Term Catalysts [View article]
    As someone who knows the industry well, we would not touch Volterra. VLTR is a value trap and while it is cheap, it is not cheap enough, and far from the cheapest in the semiconductor industry - we're not believers that cheapness is a catalyst to make stocks work.
    VLTR's issues in notebook are very real, and the technical advantages they've had in server are diminishing. Solar is a real opportunity, but not before late 2014 at the earliest, and then from a small base.
    If you are looking for a cheap semiconductor stock with catalysts check out IMOS at 2.5x EV/EBITDA, over 15% FCF yield, upcoming buyback, and explosive growth in end markets (memory, LCD driver-ICs).
    May 22, 2013. 08:58 AM | Likes Like |Link to Comment
  • Why I'm Buying Multiband Hand Over Fist [View article]
    Thanks for the great work and quick responses to both questions. I think the additional info provided enhances an already compelling write-up.
    May 21, 2013. 08:27 PM | Likes Like |Link to Comment
  • Why I'm Buying Multiband Hand Over Fist [View article]
    Nice article. As with Logic above, would love to get your thoughts on the value of different parts.
    Also, you write, "It may take a while, but eventually the true value is always realized." - well, what do you believe true value is? The 15x '14 EPS you reference, or a different target?
    Again, great job at identifying a nice risk/reward opportunity.
    May 21, 2013. 06:16 PM | Likes Like |Link to Comment
  • Enormous Insider Buy Signals Loudly For Audience [View article]
    CFO's buys are entirely legit. This is, in fact, a very legitimate take-out candidate which is bite-size for the likes of Qualcomm, Samsung, Google, etc. Kingsley Park may be pumping, but well worth doing your own due diligence. Personally, would be shocked if this company is not bought out in the next 12 months.
    May 9, 2013. 12:42 PM | Likes Like |Link to Comment
  • Apple (AAPL +1.9%) has already received $40B+ worth of orders for a 6-part debt offering expected to price later today, Reuters reports, while adding the company is expected to issue at least $15B in debt. 3-year, 5-year, 10-year, 30-year, and floating-rate notes are said to be part of the package. Meanwhile, Jefferies' Peter Misek (hit-and-miss with his iDevice predictions) says a bigger iPhone will likely arrive in June '14. (bond yields[View news story]
    We called this on Feb 21, 2012 - yes a bit early ( ) - Please email us if you would like us to consult with your company regarding optimal capital allocation policy.
    Apr 30, 2013. 02:41 PM | Likes Like |Link to Comment
  • Apple (AAPL +3.2%) is reportedly offering $17B in its bond sale, making it the largest U.S. corporate debt deal ever. Bloomberg reports $5.5B in 10-year debt will be sold at just a 75bps premium to 10-year Treasury yields (currently at 1.68%). (previous: I, II) Update (3:47): The deal is official. Reuters: "The company is offering $1 billion of three-year floating-rate notes, $1.5 billion of three-year fixed-rate notes, $2 billion of five-year floating-rate notes, $4 billion of five-year fixed-rate notes, $5.5 billion of 10-year fixed-rate notes and $3 billion of 30-year fixed-rate notes." [View news story]
    We called this Feb 21, 2012 (yes, a bit early). - Email us, we're happy to consult with your firm regarding optimal capital allocation policy.
    Apr 30, 2013. 02:39 PM | Likes Like |Link to Comment
  • Silicon Motion Could Be The Next Himax [View article]
    We believe all criticism listed in the various comments is justified. Certainly FAR from our best call, although we think shares will gradually move higher.

    The conference call was pretty wretched and the uncertain future of the transceiver business is a major concern. Nonetheless, we believe our view still has validity (diminished validity, but validity). Considering the magnitude of the revision, shares were only off modestly (and above the level where we wrote the article) - which was, and is our point - that shares were offering a compelling risk-reward. New EPS numbers now sit in the $1.00-$1.20 range, with the company having thrown in the kitchen sink in terms of bad news. So the P/E ex-cash is 5x-6x...and we'd suggest the next EPS revision is upward.

    On the call, the company noted that based on legal advice, it set up the terms of its $40 million share repurchase program in 1Q, but did not yet begin repurchasing. They said on the call, "we'll be in the market very soon." Not to be conspiracy theorists, but certainly a good reason to pack a lot of bad news into a single conference call.

    Our view is that shares will drift higher, the next EPS revision is up, the buyback will help (perhaps significantly), weak hands have exited shares, and the dividend will attract investors - not to mention the possibility always exists for a buyout, despite the fact they are a Taiwanese company.

    We remain long, but our enthusiasm is SIGNIFICANTLY diminished.
    Apr 26, 2013. 06:09 PM | 1 Like Like |Link to Comment
  • Silicon Motion Could Be The Next Himax [View article]
    We are not sure regarding the Galaxy 4, we'd imagine its the Qualcomm solution.
    We believe that Samsung intends to continue to develop internal basebands and not rely solely on Qualcomm, which should provide a sizable opportunity in the transceiver segment for the foreseeable future.
    Regarding Samsung or anyone else developing eMMCs - we don't see it. We'd certainly defer to Ashraf Eassa to weigh in with his opinion on SIMO's technological moat (Ashraf wrote a very good bullish piece on SIMO in late December - ill-timed perhaps, but there's nothing in it with which we disagree except we use lower target multiples). The facts suggest that the technology that SIMO is providing is getting significantly more challenging, not easier, and that there is a technological moat (SIMO has almost 200 patents). ASPs for card/usb controllers up for 12 consecutive quarters. With each ensuing NAND shrink, performance challenges become greater. Dealing with smaller transistors, new electrical/interference issues, faster read/write speeds, etc. We'd argue that technologically, the market is moving in SIMOs favor, and it is ever less likely that Samsung, Hynix or others try to make their own.
    Apr 25, 2013. 01:37 PM | Likes Like |Link to Comment
  • Silicon Motion Could Be The Next Himax [View article]
    Hi Joe, please see our comment above. Essentially we are saying that one can't take a static view of the world in which SIMO operates. As an investor, on SIMO one can get paid for the opportunities of which we're currently aware, but given the pace of technology change, new incremental opportunities that add more juice to the story, may emerge (just as Google Glass/wearable computing appears to add juice to the HIMX story). We'd argue that just as technology change puts companies at risk (see Nokia, Blackberry and now Apple), it also adds positive tail risk - which can transform a good investment into a great one.
    Apr 25, 2013. 01:05 PM | Likes Like |Link to Comment
  • Silicon Motion Could Be The Next Himax [View article]
    My, aren't we just a little bit cynical today.

    Our point is two-fold.

    First, buying a cash-rich, technology company, trading at 3x EPS, with a 5%+ dividend and buyback is usually a good strategy if one is in the business of trying to make money (we are). Prior to the SA article you mention, HIMX had already appreciated over 70% (and despite being "dumped" is 60% higher than when the article was published). Buying a cheap semi stock at a fundamental bottom can lead to significant gains and SIMO offers a compelling risk/reward.

    Second, our point is that the pace of technology change is so rapid that new, incremental markets emerge all the time. So while we may be playing SIMO for a 30-60% gain, unforeseen positive events could occur. We say it is naive and premature to call wearable computing a pump. Is the use of flash memory in cell phones or MP3 players a pump? If you were to look at industry forecasts from Gartner or Forrester in the late 90s (ie 1999), there is no mention of NAND being used in cell phones at ANY TIME in the future, and minimal mention of its application in an MP3 player. These markets opened because of the pace of technology change (die shrinks, mobile broadband, digital encryption, etc.). The history of flash memory entirely supports our view that new applications for flash will continue to emerge, often in heretofore unexpected ways - and we'd suggest that SIMO would likely benefit.

    Finally, we didn't discuss it in the article, but SIMO at these levels is clearly an acquisition target or a target for an activist fund if shares don't move higher. Healthy semiconductor company don't stay at 3x EPS for the long-term.
    Apr 25, 2013. 12:45 PM | 4 Likes Like |Link to Comment
  • ChipMOS (IMOS +17.9%) skyrockets after trading in its ChipMOS Taiwan subsidiary begins on Taiwan's OTC Gre Tai Securities Market. Yesterday, the company said ChipMOS Taiwan is working to meet eligibility requirements for the actual Taiwan Stock Exchange, and hopes to do so by Q2 '14. Among the requirements is the lowering of ChipMOS' stake in the Taiwanese unit to 70% or less from a current 83.4%. [View news story]
    Please see our bullish Alpha-Select article here
    Based on pricing of IPO in Taiwan, US shares are fairly valued at ~$32
    Apr 19, 2013. 09:41 AM | Likes Like |Link to Comment