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Yesterday, 2:37 PM
- Many tech stocks are seeing 6%+ losses as investors flee to safety yet again. The Nasdaq is down 3.4%, and the S&P 2.7%.
- As was the case on Friday following Tableau and LinkedIn's disappointing guidance, a slew of enterprise tech stocks are seeing big losses, with cloud software and security tech names well-represented on the casualty list.
- Also: Solar stocks are having another brutal day (TAN -6.7%) as energy stocks get routed amid fears Chesapeake Energy is close to bankruptcy. WTI crude oil is once more near $30/barrel.
- Enterprise software decliners: Adobe (ADBE -9.6%), Paylocity (PCTY -19.1%), Salesforce (CRM -9.9%), Workday (WDAY -12%), Guidewire (GWRE -12.5%), ServiceNow (NOW -11.5%), Zendesk (ZEN -13.8%), Paycom (PAYC -13.4%), Marin Software (MRIN -10.3%), Castlight (CSLT -8.4%), Cornerstone OnDemand (CSOD -12.1%), Atlassian (TEAM -13.2%), inContact (SAAS -9.6%), and Bazaarvoice (BV -14.5%).
- Enterprise security decliners: Palo Alto Networks (PANW -12.2%), FireEye (FEYE -9.8%), CyberArk (CYBR -11.5%), Proofpoint (PFPT -12.7%), Qualys (QLYS -8.9%), Imperva (IMPV -9.7%), Rapid7 (RPD -9.4%), and Barracuda (CUDA -8.4%).
- Solar decliners: SunEdison (SUNE -11.3%), SunPower (SPWR -8.8%), JinkoSolar (JKS -7.6%), SolarEdge (SEDG -7.9%), Yingli (YGE -7.1%), TerraForm Power (TERP -10.7%), and TerraForm Global (GLBL -9.2%).
- Other major decliners: Micron (MU -9.1%), Western Digital (WDC -10.5%), Arista (ANET -10.9%), Universal Display (OLED -10.6%), Rackspace (RAX -11.3%), Fitbit (FIT -8.7%), Nimble Storage (NMBL -11.3%), Sierra Wireless (SWIR -9.9%), Rocket Fuel (FUEL -9.8%), Knowles (KN -9%), Mitel (MITL -8.9%), and Alarm.com (ALRM -8.9%).
- Previously covered: Yelp, Cognizant, Tableau, Globant, Ambarella, European tech stocks
Fri, Jan. 29, 10:25 AM
- With expectations low thanks to weak PC sales and soft enterprise server/storage demand, Seagate (STX +11.7%) has surged after beating FQ2 estimates and providing light FQ3 guidance. Likewise, archrival Western Digital (WDC +11.2%) is faring well after posting mixed FQ2 results (revenue missed, EPS beat) and guiding light.
- Guidance: Seagate has guided on its FQ2 call for FQ3 revenue of $2.7B, below a $2.85B consensus. Western guided on its call (transcript) for revenue of $2.8B-$2.9B and EPS of $1.20-$1.30, below a consensus of $3.23B and $1.46.
- Seagate details: Seagate's FQ2 EPS benefited from the repurchase of 2.9M shares at a cost of $107M. Non-GAAP gross margin was 25.6%, +140 bps Q/Q and -260 bps Y/Y, and within a 25.5%-26% guidance range.
Hard drive revenue fell 21% Y/Y to $2.73B; revenue from enterprise systems, flash, and other products rose 15% to $259M. Hard drive shipments fell 19% Y/Y to 45.9M, with average capacity rising 23% to 1.32TB.
- Western Digital details: Non-GAAP gross margin fell 40 bps Q/Q and 200 bps Y/Y to 28.5%; Western had forecast GM would be "slightly up" Q/Q, and is against guiding for a Q/Q increase. No shares were repurchased. Hard drive shipments fell 19% Y/Y to 49.7M; enterprise SSD revenue rose 44% to $270M. Western estimates the total market (TAM) for hard drives was 115.1M units, down from 118.7M in FQ1 and 140.8M a year ago. 35% of revenue was PC-related
Regarding Chinese firm Unisplendour's planned investment (15% stake) in Western, the company says it continues working with U.S. regulators (the CFIUS), and expects a decision in February. Meanwhile, the SanDisk acquisition (expected to see less regulatory scrutiny) is forecast to close in calendar Q2.
- Western also rallied yesterday after SanDisk (SNDK +4.7%) posted a healthy Q4 beat and issued soft Q1 guidance (expected given NAND price pressure and Apple's outlook) on Wednesday afternoon. For its part, SanDisk is up 9% over the last two days.
- Seagate: FQ2 results, earnings release, slides (.pdf).
- Western Digital: FQ2 results, earnings release, datasheet (.pdf).
Thu, Jan. 28, 4:18 PM
Wed, Jan. 27, 5:35 PM| Wed, Jan. 27, 5:35 PM | 9 Comments
Mon, Jan. 25, 3:08 PM
- Philips recently announced its has cancelled a $3.3B deal to sell an 80.1% stake in its Lumileds LED lighting unit to an Asian investment group led by Chinese fund GO Scale Capital. The cancellation follows objections from the Committee on Foreign Investment in the United States (CFIUS), and has sparked concerns about growing regulatory scrutiny of Chinese acquisitions - including deals in which the selling company isn't American.
- Synaptics (SYNA -8.1%), SanDisk (SNDK -11.1%), and Western Digital (WDC -4.5%) have all seen steep losses on a day the Nasdaq is down 0.6%. Synaptics soared last Wednesday after Bloomberg reported the company is getting closer to a deal to be purchased by a Chinese investment group for over $110/share.
- Western has a pending deal to sell a 15% stake to China's Unisplendour at a huge premium to current trading levels. The closing of that deal, meanwhile, affects the terms of Western's pending acquisition of SanDisk. Selling a 15% stake to a Chinese firm is, of course, is very different from allowing the firm to fully acquire a company.
- This morning, CLSA's Mark Heller downgraded SanDisk to Underperform, while citing weakening NAND fundamentals and the potential (given the selloff in Western's shares) for Unisplendour to walk away from the Western deal. He now sees a 25% chance the Western/SanDisk deal falls apart.
Mon, Jan. 25, 9:38 AM
- Citing higher deal risk and weakening NAND fundamentals, CLSA's Mark Heller has downgraded SanDisk (SNDK -1.6%) to Underperform, and cut his target by $16 to $70.
- Heller doesn't think weakening fundamentals will unravel Western Digital's (WDC -2.2%) pending cash/stock acquisition of SanDisk, but is worried about the potential for Tsinghua Unigroup subsidiary Unispendour to walk away from its deal to buy a 15% stake in Western for $92.50/share (107% above Western's Friday close).
- If Unisplendour was to walk away, Heller sees Western shareholders deciding on the SanDisk deal. The deal calls for Western to pay $85.10 in cash and issue 0.0176 shares for each SanDisk share provided the Unisplendour investment has closed prior to the acquisition. If it hasn't, the cash payout drops to $67.50, and the stock payout rises to 0.2387 shares. SanDisk currently trades below $67; deal closing has been forecast to occur in calendar Q3.
- Separately, Western has announced the purchase of over 100 IBM "patent assets" related to distributed storage, object storage, and non-volatile memory, as well as a cross-licensing deal with the IT giant; terms are undisclosed. Western says the purchase will augment an existing portfolio of 10K+ patents and patent applications.
- SanDisk's Q4 report arrives on Wednesday. Western's FQ2 report is due on Thursday.
Fri, Jan. 15, 12:35 PM
- On a day the Nasdaq is off 4.1%, companies with strong PC exposure are seeing even bigger losses after Intel (down 9.2%) beat Q4 estimates and provided healthy 2016 sales guidance, but also reported a slowdown in server CPU sales growth and offered cautious earnings call remarks about Chinese demand and macro trends.
- Intel's Client Computing Group (provides PC/mobile CPUs) only saw a 1% Y/Y revenue drop in Q4 in the face of weak PC demand. However, volumes were down 16%, with desktop, notebook, and tablet CPU volumes respectively falling 9%, 10%, and 33%. A 17% increase in ASPs minimized Intel's revenue drop. Earlier this week, IDC and Gartner respectively estimated PC shipments fell 10.6% and 8.3% Y/Y in Q4.
- The list of PC-related names seeing big losses includes Microsoft (MSFT -4.8%), Nvidia (NVDA -6.7%), AMD (AMD -8.1%), HP Inc. (HPQ -5.2%), Micron (MU -8.9%), Seagate (STX -6.4%), and Western Digital (WDC -6.4%). AMD reports on Jan. 19, Microsoft and Western on Jan. 28, and Seagate on Jan. 29.
- In other Microsoft news, the company has carried out price cuts of up to 17% for Azure cloud computing services, following new price cuts from Amazon, and is reportedly looking to acquire Indian mobile ad network owner InMobi. Google was rumored to be in buyout talks with InMobi last year.
- AMD, meanwhile, has begun shipping its Opteron A1100 (Seattle) ARM server CPU. Seattle, first announced in 2013, sports up to eight 64-bit ARM Cortex A-57 CPU cores, and enters a market also targeted by AppliedMicro, Cavium, and Qualcomm.
Tue, Jan. 12, 5:56 PM
- IDC estimates global PC shipments fell 10.6% Y/Y in Q4 to 71.9M, just a slightly smaller drop than Q3's 10.8%. Gartner is once more a little less downbeat, estimating shipments fell 8.3% to 75.7M.
- For the whole of 2015, IDC estimates shipments fell 10.4% to 276.2M. The firm notes adding detachable tablets to its count would respectively provide ~6% and ~3% boosts to Q4 and 2015 growth rates.
- The Q4 figures suggest Windows 10 (available as a free upgrade to Windows 7/8 users) and Intel's (NASDAQ:INTC) Skylake CPU launch provided only a modest sales lift. IDC: "The PC market continued to face persistent challenges [in 2015] from longer-PC lifecycles and competition from mobile phones and tablets, despite the slowing growth in those markets. However, economic issues like falling commodity prices and weak international currencies, as well as social disruptions in EMEA and Asia/Pacific that disrupted foreign markets were a larger factor for 2015."
- IDC VP Loren Loverde still thinks PC replacement rates will pick up in 2016. "Commercial adoption of Windows 10 (NASDAQ:MSFT) is expected to accelerate, and consumer buying should also stabilize by the second half of the year. Most PC users have delayed an upgrade, but can only maintain this for so long before facing security and performance issues." Counting detachable tablets, IDC expects 1%-2% 2016 growth. Gartner forecasts a 1% decline.
- Lenovo (OTCPK:LNVGY) remained the PC market's top player: IDC estimates Lenovo's shipment share rose 140 bps Y/Y in Q4 to 21.4%. #2 HP's (NYSE:HPQ) share rose 10 bps to 19.9%. #3 Dell's rose 70 bps to 14.1%.
- Apple (NASDAQ:AAPL) and Asus (OTC:AKCPF) were tied at #4 with 7.9% shares - Apple's share rose 110 bps, and Asus' 90 bps. Apple's revenue share could be closer to 15%. Non-top 5 vendors, hurt by their relative lack of scale, collectively saw their shipment share drop 420 bps to 28.7%
- Related tickers: NVDA, AMD, MU, STX, WDC
Mon, Jan. 11, 6:19 PM
- Citing lower market multiples, Deutsche's Sherri Scribner respectively cut her Seagate (NASDAQ:STX) and Western Digital (NASDAQ:WDC) targets by $5 and $15 to $40 and $80. Nonetheless, Buy ratings were reiterated for both names - Scribner believes hard drive demand is stabilizing, and that Seagate/Western's valuations are attractive.
- RBC's Amit Daryanani estimated PC shipments from Taiwanese contract manufacturers (ODMs) fell 16% Y/Y in December, and deemed the figure "slightly negative" for Seagate and Western. He expects a soft 1H16, with potential improvement later in the year.
- Meanwhile, Taiwan's Economic Daily News reported notebook shipments from Taiwanese ODMs are expected to drop 15% Q/Q to 25M (seasonality will likely play a role), with volumes unlikely to recover prior to new notebook launches in Q2.
- Seagate fell 3.7% in regular trading; shares now trade for just 7.4x an FY17 (ends June '17) EPS consensus of $4.22. Western fell 4.7%; shares go for 7.2x an FY17 EPS (ends June '17) EPS consensus of $7.38.
Fri, Jan. 1, 4:53 AM
- Dow: NKE +29%; HD +27%; MCD +25%; GE +21%; V +16%.
- S&P 500: NFLX +135%; AMZN +119%; ATVI +90%; NVDA +61%; CVC +54%.
- Nasdaq: NFLX +135%; AMZN +119%; CTRP +104%; ATVI +90%; NVDA +61%.
- Dow: WMT -29%; CAT -28%; AXP -26%; CVX -21%; UTX -18%.
- S&P 500: CHK -77%; CNX -77%; SWN -75%; FCX -71%; FOSL -67%.
- Nasdaq: MU -59%; WDC -47%; STX -47%; VIAB -46%; BBBY -37%.
Dec. 2, 2015, 7:27 PM
- Whereas 2.5" SSDs cost 11x as much on hard drives on a $/GB basis in 2012 ($0.99 vs. $0.09), they now cost 6.5x as much ($0.39 vs. $0.06), estimates DRAMeXchange. Moreover, with high-density 3D NAND expected to drive major price declines, the firm predicts the delta will narrow to 2.8x ($0.17 vs. $0.06) in 2017.
- Thanks to lower prices, SSDs (generally faster, thinner/lighter, more durable, and less power-hungry than hard drives) are expected to go into 42% of laptops in 2017, up from 26% in 2015. Concurrently, hard drive penetration is expected to drop to 59% from 74%. DRAMeXchange's Alan Chen: "Branded PC vendors and channel distributors are holding back on their SSD purchases due to lower-than-expected notebook sales. However, 256GB SSDs will be moving close to price parity with mainstream HDDs in 2016, so the adoption of SSDs in the business notebook segment will rise."
- The report might have weighed on hard drive giants Seagate (NASDAQ:STX) and Western Digital (NASDAQ:WDC): Seagate fell 5.4% and Western fell 2.4% on a day the Nasdaq dropped 0.6%.
- Western is less than two months removed from announcing a $19B deal to buy NAND flash/SSD giant SanDisk. Seagate has formed a NAND partnership with Micron, but has opted not to buy a NAND manufacturer. CFO David Morton defended the strategy during a recent conference talk (transcript). "I don’t think NAND is going to be hard to access in the next two to three years ... I believe that there’s a lot of changing nodes going on in this space, whether if it’s 2D, 3D, cross-point and so forth. And so I look at more from optionality perspective and then I’ll able to participate and have meaningful relationships with all the other individual [suppliers]."
Nov. 16, 2015, 3:16 AM
- China's Tsinghua Unigroup is planning to invest 300B yuan ($47B) over the next five years to build the world's third-largest chipmaker and confirmed it was in talks with a U.S.-based company about a deal that could be finalized by the end of November.
- The state-owned tech firm declined to give more details of the transaction but said buying a majority stake was unlikely as it was too "sensitive" for the U.S. government.
- Over the last few months, Tsinghua prepped a $23B bid to acquire DRAM/NAND flash giant Micron (NASDAQ:MU) and took a 15% stake in Western Digital (NASDAQ:WDC).
Nov. 9, 2015, 4:15 PM
- Less than two months after announcing Unisplendour (a subsidiary of China's state-controlled Tsinghua Unigroup) is buying a 15% stake at a hefty premium, Western Digital (NASDAQ:WDC) states it's forming a JV with Unisplendour to provide data center storage offerings for the Chinese market. Unisplendour will own 51%, and Western 49%. The JV is expected to become operational by Q2 2016.
- The move comes as Western gradually expands its enterprise storage lineup to feature (in addition to hard drives and SSDs) a variety of higher-level solutions. The company bought flash storage array vendor Skyera in late 2014, and object storage software provider Amplidata a few months later.
- The SanDisk acquisition will hand Western SanDisk's Fusion-io PCIe server flash module line and recently-launched InfiniFlash arrays, to go with SanDisk's enterprise SSD line.
Nov. 4, 2015, 5:29 AM
- Western Digital (NASDAQ:WDC) declares $0.50/share quarterly dividend, in line with previous.
- Forward yield 2.92%
- Payable Jan. 15; for shareholders of record Jan. 1; ex-div Dec. 29.
Oct. 29, 2015, 1:15 PM
- Western Digital's (WDC +1.7%) FQ1 results were roughly in-line with the outlook provided in its Oct. 21 pre-announcement (provided while announcing the SanDisk deal). The company guided on its earnings call (transcript) for FQ2 revenue of $3.3B-$3.4B and EPS of $1.50-$1.60, below a consensus of $3.45B and $1.75.
- Western is nonetheless trading higher. Archrival Seagate (STX -2.9%), which issued an FQ1 warning on Oct. 15 (enterprise share loss to Western is believed to be the culprit) and reports on Friday morning, is selling off.
- Western's gross margin fell 90 bps Q/Q and 120 bps Y/Y in FQ1 to 28.9%; it's expected to rise "slightly" in FQ2. $60M was spent on buybacks; Western has said it will suspend its buyback (while keeping its dividend) on account of the SanDisk deal.
- Hard drive shipments totaled 51.7M - 15.8M notebook, 11.7M desktop, 11.5M consumer, 5.6M branded, 7.2M enterprise - up from 48.5M in FQ4 and down from 64.7M a year ago. 66% of revenue came from non-PC markets, up from 55% a year ago (the SanDisk deal will further increase that number). Enterprise SSD revenue was $233M vs. $244M in FQ4 and $156M a year ago.
- On the earnings call (transcript), Western noted demand for high-capacity enterprise hard drives (beloved by Internet giants) was "somewhat softer than anticipated" due to the "absorption of previously deployed storage assets." Regardless, it still expects a 35% enterprise capacity CAGR through 2020.
- The company echoes others in declaring it sees "some signs of stabilization" in PC demand. Ahead of the SanDisk deal (will boost Western's SSD share and lower its flash costs), Western also reports seeing "a very competitive market" in enterprise SSDs.
- Western's FQ1 results, PR, datasheet (.pdf)
Oct. 28, 2015, 4:17 PM
- Western Digital (NASDAQ:WDC): FQ1 EPS of $1.56 in-line.
- Revenue of $3.36B (-14.7% Y/Y) beats by $40M.
Western Digital Corp is a developer, manufacturer and provider of data storage solutions that enable consumers, businesses, governments & other organizations to create, manage, experience & preserve digital content. Its products include HDDs and SSDs.
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