Seeking Alpha
  • Today - Friday, April 18, 2014

  • 5:03 AM
    • Globalfoundries has agreed to license Samsung's (SSNLF) most advanced chipmaking technology, 14-nanometer FinFET, in a co-operation deal that analyst Jim McGregor says poses "a huge competitive threat" to Taiwan Semiconductor Manufacturing Co. (TSM), which controls around half of the $38.9B chip-foundry sector.
    • The collaboration could also make it more difficult for Intel (INTC) to gain a strong position in the foundry business, McGregor says.
    • The tie-up "provides an alternative to those companies that are looking to use leading-edge production." That could affect chip designers such as Qualcomm (QCOM).
    | 1 Comment
  • 4:34 AM
    • Microsoft (MSFT) has sold over 5M Xbox One computer gaming consoles to retail shops since launching the device in November, well below the more than 7M PlayStation 4 machines that Sony (SNE) has sold since its product was launched last year as well.
    • Still, Xbox One sales have outpaced those of its predecessor, the XBox 360, by over 60% at the same point in time since launch.
    • The introductions of the Xbox and PlayStation 4 helped boost U.S. sales of consoles in March by 78% on year to $395M.
    • However, sales of videogames fell 28% to $432M, with revenue to multiplayer Internet games such as "World of Warcraft" dropping 19% to $84.8M.
    • Tickers: EA, ATVI
    | Comment!
  • Thursday, April 17, 2014

  • 6:58 PM
    • While U.S. physical retail video game sales have been slumping for some time (as shown by NPD's data), SuperData estimates U.S. digital gaming revenue rose 9% Y/Y in March to $936M.
    • Revenue for subscription titles such as Activision (ATVI +1.2%) cash cow World of Warcraft fell Y/Y, but download and free-to-play revenue rose. Electronic Arts' (EA -0.1%) much-hyped Titanfall delivered the most digital revenue among "boxed" titles.
    • SuperData estimates conversion rates (i.e. the ratio of paying users to total users) for social gaming platforms rose to 2.3% from 1.9% six months earlier. But Zynga (ZNGA +4.4%), which had a Q4 conversion rate of 1.7% and only averages $0.13 per DAU (less than its closest rivals), continues to trail.
    • Zynga rallied today after officially launching FarmVille 2: Country Escape (first announced in March) in the App Store and Google Play. Morgan Stanley praised the game's monetization potential last week.
    • In spite of widespread concerns about slumping Candy Crush Saga (KING -1.3%) usage, SuperData thinks the game is holding up reasonably well for now. It estimates spending rose 1.2% M/M (3 extra days helped), with mobile MAUs rising 0.3% and social (read: Facebook) MAUs falling 2.1%.
    • Other game developers: TTWO, GLUU, KNM, SGAMY
    | Comment!
  • 6:15 PM
    • "We're obviously in the throes of what feels like a correction for the small-cap and growth-equity companies," says Revolution Ventures managing partner David Golden.
    • Following a Q1 that saw the highest level of U.S. VC investment since 2001 ($10.7B, up from $9.1B in Q4 and $7.5B a year earlier ), as well as a handful of late-stage deals featuring eye-popping valuations (Airbnb, Dropbox), a rapid selloff in high-beta tech stocks is yielding a sense of caution.
    • Accel Partners' Jim Breyer (an early Facebook investor): "Not a board meeting goes by when at least half the meeting isn't spent on financial strategy." Venrock's Nick Beim: "We all feel like we're at the top of the cycle, and everyone's skating on new ice ... Just how thin the ice is not yet clear."
    • GSV Capital's (GSVC) Michael Moe, whose firm often takes positions in late-stage startups, likes what he sees. "I think prices will get more favorable for buyers because it will be more difficult to do megadeals at megavaluations." The Firsthand Tech Value Fund (SVVC) might also get more favorable terms.
    • Today's tech IPOs - Weibo and Leju - each delivered solid gains, but only did so after pricing their offerings at the low end of their respective ranges.
    | Comment!
  • 5:47 PM
    • Citing telecom industry sources, Globes reports Cellcom (CEL) plans to launch an Israeli pay-TV service in four months. Ahead of the launch, the mobile carrier has expanded an internal trial, and reportedly ordered new HD set-tops.
    • Globes cautions Cellcom continues to insist it won't launch a TV service unless it can obtain lower infrastructure prices from local telecom giant Bezeq (BZQIF). Bezeq, which competes against both Cellcom and Partner Communications (PTNR), will soon be able to offer bundled telecom service plans.
    • The report follows a December quarter in which Cellcom's service revenue fell 13% Y/Y, and its EBITDA 24%, due to intense mobile price competition.
    | Comment!
  • 5:26 PM
    • After underperforming yesterday in response to a mixture of in-line and soft outlooks from Intel, ASML, and Linear, chip stocks bounced back strongly following more encouraging numbers from foundry giant TSMC, NAND flash giant SanDisk, and well-diversified Cypress.
    • TSMC, seen as a bellwether for chip demand due to a client list that includes most of the world's top fabless chipmakers (Qualcomm, Broadcom, MediaTek, Xilinx, etc.), beat Q1 estimates, issued strong Q2 guidance, and reported seeing healthy sales from mobile clients, and for its advanced 28nm process node.
    • SanDisk offered strong margin guidance to go with a Q1 beat. Cypress posted a slight Q1 revenue beat, and issued Q2 revenue guidance that beat consensus at the midpoint.
    • Notable gainers: ARMH +3.9%. MRVL +2.2%. CODE +5.1%. RMBS +4.4%. IDTI +3%. ENTR +3.7%. PXLW +6.1%. QUIK +2.4%.
    | 1 Comment
  • 4:39 PM
    • AMD expects Q2 revenue to be flat to up 6% Q/Q; that's better than a consensus for a 3% decline.
    • Due to desktop weakness, Computing Solutions (PC/server CPU) sales fell 8% Q/Q and 12% Y/Y in Q1; they were down 13% Y/Y in Q4, and 15% in Q3.
    • Graphics & Visual Solutions (GPUs, console/embedded designs) sales fell 15% Q/Q and rose 118% Y/Y. Console-related sales fell Q/Q, but GPU sales rose.
    • CPU ASPs were flat Q/Q and down slightly Y/Y. GPU ASPs rose Q/Q and Y/Y due to Radeon R7/R9 demand (some of it from Litecoin miners).
    • Gross margin (a point of concern lately) was 35%, flat Q/Q, down 600 bps Y/Y, and in-line with guidance. GM is expected to remain at 35% in Q2.
    • R&D spend fell 11% Y/Y to $279M, MG&A spend fell 13% to $156M. AMD ended Q1 with $982M in cash, down from $1.19B at the end of Q4 thanks to a GlobalFoundries payment. Debt fell by $43M to $2.06B.
    • Q1 results, PR, CFO commentary (.pdf)
    | 22 Comments
  • 4:20 PM
    • Though pre-IPO demand was muted (leading to conservative pricing) and initial trading wasn't impressive, Weibo (WB +19.1%) and Leju (LEJU +18.6%) closed up strongly. The former is now worth $4.05B (21x sales), and the latter $1.57B (4.7x sales).
    • Sina (SINA +6.7%) managed to follow Weibo higher, but E-House (EJ -5%) couldn't get a similar lift from Leju.
    • Chinese Internet companies with upcoming IPOs - the list includes JD.com, Jumei.com (JMEI), and Cheetah Mobile - are likely breathing sighs of relief.
    | 3 Comments
  • 4:17 PM
    • Advanced Micro Devices (AMD): Q1 EPS of  $0.02 beats by $0.02
    • Revenue of $1.4B (+28.4% Y/Y) beats by $60M.
    • Press Release
    | 30 Comments
  • 4:07 PM
    • CEPHEID (CPHD): Q1 EPS of -$0.01 beats by $0.06.
    • Revenue of $106.9M (+16.3% Y/Y) beats by $2M.
    • Press Release
    | Comment!
  • 4:03 PM
    • TSMC (TSM +2.8%) has guided for Q2 revenue of NT$180B-NT-$183B ($5.97B-$6.07B), well above a $5.61B consensus. Gross margin is expected to be in a range of 47.5%-49.5%, after coming in at 47.5% in Q1 (+170 bps Y/Y).
    • TSMC states strong mobile chip demand contributed to its Q1 beat, which follows a March guidance hike, and that it's also benefiting from inventory restocking and "better performance and higher yield and reliability" for advanced process nodes.
    • 28nm wafers made up 34% of Q1 revenue, and 40/45nm wafers 21%.
    • UBS' William Dong has upgraded shares to Buy, and thinks strong demand for 4G smartphones (have higher chip content than 3G phones) is giving the foundry a lift. He expects 10%-12% Q/Q Q3 revenue growth as orders for Apple's A8 CPU ramp, and 3%-5% growth in Q4.
    • At the same time, Dong expects TSMC to see a more "balanced pricing environment" in 2015 as smaller foundry rivals such as Samsung try to take share.
    • Q1 results, PR
    | Comment!
  • 2:46 PM
    • Cypress (CY +1.2%) guided on its Q1 CC for Q2 revenue of $181M-$186M ($183.5M midpoint) and EPS of $0.11-$0.13 vs. a consensus of $182.8M and $0.12.
    • Shares are posting moderate gains after initially trading lower following the chipmaker's Q1 results, which featured in-line EPS and a small revenue beat.
    • A slightly soft gross margin (50.3%, -70 bps Q/Q and -40 bps Y/Y) pressured EPS. On the other hand, quarter-ending book-to-bill was a healthy 1.08.
    • Touch controller rival Synaptics (SYNA +5.4%) is posting big gains on what's proving a good day for chip stocks (SOXX +2.2%).
    | 1 Comment
  • 2:29 PM
    • Though IBM (IBM -3.2%) reiterated its 2014 EPS guidance, it was "really reset lower" given the company lowered its full-year tax rate forecast to 20% from 23%, says Cowen's Moshe Katri, reiterating a Hold. "The big issue is IBM's legacy businesses are getting hit by multiple points."
    • Bernstein's Toni Sacconaghi reiterates an Outperform, but nonetheless states IBM's Q1 numbers "likely reinforced prevailing concerns about revenue growth, cash flow and earnings quality."
    • Wells Fargo (Market Perform) sees some silver linings: Services margins grew, WebSphere middleware sales were up 12% Y/Y, and cloud, security, and mobility sales are growing well. But it also notes services signings of $11.2B missed a $13B consensus, and that Power (-22% Y/Y), mainframe (-40%, six quarters into a product cycle), and Chinese (-20%) sales remain weak.
    • Mentioned on the CC (transcript): 1) IBM still expects to grow 2014 free cash flow from last year's $15B, in spite of producing just $600M in Q1. 2) Though $8.2B was spent on buybacks in Q1, full-year buybacks are expected to be less than 2013's $13.9B. 3) IBM's app outsourcing ops have seen "pretty substantial price pressure."
    • Cloud-related revenue (boosted by SoftLayer) rose 50% Y/Y, and is now on a $2.3B/year run rate, but that still makes it less than 3% of total revenue. Meanwhile, job cuts led opex to fall 8% Y/Y to $7.4B.
    • Q1 results, guidance/details, PR
    | Comment!
  • 1:45 PM
    • Twitter's (TWTR +2.9%) targeted mobile app install ads, already in testing, have officially launched.
    • As previously reported, the ads leverage Twitter's expandable card format. They also leverage Twitter's online ad-buying platform, and can be delivered on 3rd-party apps via MoPub's mobile ad exchange.
    • Twitter is looking to take a bite out of Facebook's (FB +0.1%) app install ad business, which has reeled in thousands of developers struggling to get recognized on the App Store and Google Play.
    • Facebook's app install ads drove 245M downloads last year Video ad support was added last fall.
    • Beta testers for Twitter's solution include Spotify and top Japanese mobile game platform Gree. The company suggests it plans to launch additional targeted ad products in tandem with MoPub.
    • Twitter's product teams haven't been shy about borrowing ideas from Facebook. Of course, the opposite also holds.
    | 2 Comments
  • 1:21 PM
    • After initially trading near breakeven following a Baird upgrade to Outperform, SolarCity (SCTY +1.7%) has moved higher.
    • Baird's Ben Kallo thinks the 35% drop seen since Feb. 27 provides a great buying opportunity for "the stock most levered to the U.S. rooftop market, which will likely undergo a boom over the next several years."
    • He also argues SolarCity's cost cuts and scale give it a competitive edge, and that solar asset-backed notes provide it with cheap capital to "capitalize on the expansive U.S. greenfield opportunity."
    • Deutsche and Roth talked up the value of SolarCity's asset securitization efforts two weeks ago. Shares rallied yesterday on news of the DOE's loan guarantee proposal.
    | Comment!
  • 1:03 PM
    • Netflix (NFLX +3.6%) is in talks with Vodafone (VOD +1.1%) about a deal that would give the giant international carrier's subs "free access to Netflix content for a period of time," Bloomberg reports.
    • Vodafone has majority ownership of networks in 15 European countries, including three Netflix markets - the U.K., Ireland, and the Netherlands. The company already has deals with Spotify and Sky Sports that provide free content access to new U.K. 4G subs.
    • The report comes as AT&T tries to get Netflix and other streaming service providers to sign up for its Sponsored Data program, which allows content providers to subsidize customer data usage.
    • Netflix, boosted by a morning Pac Crest upgrade, is trading near its session highs.
    | 6 Comments
  • 12:07 PM
    • Weibo (WB) opened at $16.27, below its $17 IPO price (at the low end of a $17-$19 range) . But shares have very quickly jumped to $18.18, giving them a 6.9% gain.
    • The Chinese microblogging leader is worth $3.64B. Parent Sina (SINA +2.4%), which stands to own 58% of Weibo post-IPO after accounting for its downsized offering, has shot higher as well.
    • Prospectus, IPO preview
    • Update (12:20PM): Weibo is now up 10.1%.
    | 2 Comments
  • 12:01 PM
    • IBM soundly missed revenue estimates for yet another quarter, thanks in large part to a 23% Y/Y drop in hardware/chip sales, and also reported a $3B Y/Y drop for its services backlog. SAP missed Q1 estimates due to a mixture of forex pressure and light software license revenue.
    • Microsoft (MSFT -1.4%), whose enterprise software ops compete against both IBM (middleware, databases, developer tools) and SAP (ERP/CRM apps, databases), is trading lower. As is IBM archrival H-P (HPQ -2.6%).
    • A few enterprise cloud software vendors, some of whom compete against SAP, are also off: JIVE -3.5%. N -2%. VEEV -1.9%. MKTO -2.2%.
    | Comment!
  • 11:53 AM
    • Weibo (WB) is indicated to open below its $17 IPO price.
    • Parent SINA (SINA -0.7%) is moving lower in response.
    | Comment!
  • 11:42 AM
    • Though SAP's (SAP -2.1%) non-IFRS cloud subscription/support revenue rose 32% Y/Y in Q1 (even with Q4's rate) to €221M, its traditional software license revenue fell 5% to €623M after growing 1% in Q4.
    • Much like archrival Oracle's 2013 license revenue misses, the latter figure is bound to trigger fears about the impact of cloud software competition.
    • Support revenue (driven by software licenses, relatively steady) rose 5% Y/Y to €2.21B, and all other revenue fell 8% to €643M. Opex rose just 2% Y/Y.
    • A strong euro took a toll: Whereas revenue and op. profit each rose 2% Y/Y at current exchange rates, they've would've risen 6% and 7% at constant currency. SAP expects a similar forex impact for the whole of 2014.
    • SAP now has 3.2K+ Hana customers, up from 3K+ at the end of 2013, and nearly 1K customers now run its core Business Suite on Hana (up from 800). But no Hana revenue figure is given; Hana revenue rose 61% in 2013 to €633M.
    • Cloud billings rose 23% Y/Y to €228M (36% exc. forex), and the cloud deferred revenue balance 20% to €454M (29% exc. forex).
    • In spite of the Q1 miss, SAP is reiterating its full-year revenue and op. profit forecasts.
    • Q1 results, PR
    | Comment!
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