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  • Rubicon Technology: 6-Inch Wafers, Prices, And Other Questions [View article]
    I think there is minimal pricing risk to Rubicon from the device market. It is a lower-priced market for sapphire, though. Rubicon's focus is supplying the LED market, and only gets minimal revenue from the device market.

    On another point, at the annual meeting the RBCN management said 2014 was going to be a loss year since they were investing in R&D for their LED customers and the oversupply in the sapphire market would continue through the end of the year. Thankfully they said they thought demand would likely increase dramatically in 2015. Hopefully that will happen!

    GLTA, tk

    Long RBCN
    Aug 13 11:51 AM | Likes Like |Link to Comment
  • Rubicon Technology: 6-Inch Wafers, Prices, And Other Questions [View article]
    I think the article meant to say "cellular orientation of GTAT" not the "solar orientation of GTAT" in about the sixth paragraph.

    At its recent annual meeting Rubicon said they are selling some sapphire to the mobile device (AKA cell phone) market, but their emphasis and technology advantages are focused on the needs of the LED market. They said they are the only sapphire supplier that makes all patterns used by all LED companies. (Each has its own set it uses.) Also, Rubicon is working on adding a second production step that will make its patterned wafers even more cost effective for LED manufacturers. Rubicon said 17 LED manufacturers are testing their PSS for use in their products.

    Sapphire for mobile device usage does not require as much finishing or as many critical optical features as do LED applications. LED-application sapphire will have higher pricing (and most likely higher margins) since fewer suppliers can provide this quality.

    All other sapphire suppliers are in (low cost) Asia, except for one in Russia and GTAT, which is building its plant in Arizona. I think Rubicon's focus on the more critical (and less price sensitive) needs of the LED market is good strategy.

    There is just still too much sapphire capacity in the market and not enough demand, creating prices too low for any sapphire supplier to make money in 2014. In 2015, however, with the growth of the LED and mobile device markets, it will likely be a different story, I believe.


    Long RBCN
    Jul 18 06:03 PM | 3 Likes Like |Link to Comment
  • Windstream Needs To Revise Dividend Strategy As Company Remains Overvalued [View article]
    There are 80 million WIN shares short out of 602 million shares outstanding. These shorts have to pay the ~10% annual dividend as they hope for a significant enough share price decrease so they can cover their position without losing big money. With the recent WIN share price increase many of them must be seriously underwater. No wonder some people want the company to decrease its dividend.

    On a free cash flow basis WIN has its dividend well covered since its investment in fiber-to-the-towers project is winding down. I would never bet against and short a company paying a high dividend that is covered by its cash flows.


    Jun 27 11:51 AM | 9 Likes Like |Link to Comment
  • Windstream: Stop Focusing On The Dividend Yield [View article]
    Stone Fox,

    Of the $1.00 per year in dividend that WIN has paid for the past two years and will likely pay in the future, ~$.40 - $.50 is return of capital. That portion is NOT reported as income on any tax form. It is shown as a return of capital on the 1099 form that goes to shareholders. It is supposed to be deducted from the investment's cost basis.

    Whether all investors recognize this is another issue, but I am assuming with the fairly new (~2011) stock tax reporting requirements imposed by the IRS on stockbrokers, this will be tracked accurately by the stockbrokers. It will likely be the source of a difference in cost reporting when shareholders sell their shares.

    Windstream retroactively changed some of its 2012 dividends to returns of capital in July 2013 ( This is, of course, after the April 15 deadline for income tax filing. This means shareholders could file amended returns to reduce their dividend income and get money back from the IRS potentially, but I bet not many did. And again, their cost basis should have been reduced by an equivalent amount.

    Mar 20 10:03 AM | Likes Like |Link to Comment
  • Windstream: Stop Focusing On The Dividend Yield [View article]
    The return of capital is not taxed as income. The cost basis of the shares owned is reduced by this amount, however. When WIN shares are sold their revised cost is used to calculate the capital gain or loss.

    What returns of capital can do is to generate capital gains when the stock is sold. This is especially good for those of us who have lots of capital losses from the Great Recession (thank you, bank stocks) since we can only deduct $3,000 per year in capital losses per year from our income on our tax returns.

    Windstream still provides the same amount of dividend per year, and keeps our taxes low when we sell the stock at a profit. Returns of capital are a great thing, in my opinion.

    Also, returning capital really messes up those analysts and investors that look at the dividend payout ratio for a metric to measure stocks against. WIN has large paper (non-cash) losses from depreciation, but has plenty of cash to pay dividends with. As Stone Fox says, the much more critical metric is free cash flow.


    Disclosure: Long WIN
    Mar 18 03:20 PM | 5 Likes Like |Link to Comment
  • Rubicon Technology: Fundamentally Flawed [View article]

    Do you have a link to a Sapphire Technology page that shows their 10% operating profit? The only links I find for them are very limited, and in Korean with no English translation. Their Investor Relations page, , says it is "Under Preparation" and it has been for months. Their latest financial report I can find is from March 2013 and only contains a balance sheet,

    With regard to RBCN's large negative gross margin, a good portion of it came from their idle production capacity costs, which is included in their Cost of Goods Sold. Here is what the CEO said regarding this from their last earnings call, "The $600,000 reduction in idle plant cost is due to the increased utilization in crystal growth. We will reduce the idle plant cost in the first quarter by at least an additional $400,000 as we will be running at full utilization in the crystal growth for nearly the entire quarter." I think the RBCN gross margins will look much better this coming quarter and for those that follow. Higher prices for sapphire, which were also announced by RBCN, will also help.

    I believe Rubicon is selling to Apple, and it might be via polishers as you say. As long as they sell more sapphire, this is a good thing for their business, no?

    As I mention in my earlier post, Apple includes non-disclosure clauses in its contracts with its vendors, so RBCN can not disclose the relationship without violating the agreement. The Rubicon CEO travels to Asia a lot (as he stated at the two RBCN annual meetings I attended) and knows all of the major consumers of sapphire. I have to believe he knows the key folks at Apple, Samsung, and the other major handset manufacturers.

    It will be interesting to see how the sapphire market develops and how GTAT executes on its dramatic redirection of its business model.

    Mar 12 10:04 AM | Likes Like |Link to Comment
  • Rubicon Technology: Fundamentally Flawed [View article]

    RBCN was $8.86 per share on December 18, 2013 when this article was written. It closed yesterday at $14.34.

    Between those days a lot of positives have happened for Rubicon. It appears they have started selling to Apple. Rubicon does not mention the handset (AKA cell phone) manufacturer they are selling to (Apple hates its vendors to drop their name), but since Apple is the only handset manufacturer using sapphire and Rubicon is selling to a handset manufacturer, it makes sense to me. (See the comments made by the CEO and CFO in their latest earnings call here

    Elsewhere in the call the CEO said, ". . . the sapphire camera lens cover and dual flash now being adopted by more smartphone manufacturers." He said Rubicon has talked to those other smartphone manufacturers about their (non-electronic) handset applications like lenses. Since Samsung and Apple are intense competitors Samsung will likely adopt sapphire on its high end phones. Since GT Advanced Technology has to "maintain certain exclusivity terms" with Apple for its sapphire (per their recent supply announcement with Apple, it is very likely Rubicon will add Samsung and other cell phone manufacturers to its customer list soon.

    GTAT is doing a major strategic change from supplying sapphire furnaces to supplying low cost sapphire. They state they must accelerate the development and introduction of their new furnace design, install bunches of them in a new factory that is just being planned, they have to hire a completely new staff and train them on making sapphire (which is as much art as science), and they have to make and consistently deliver lots of high quality, low cost (because Apple negotiated a low price from GTAT) sapphire. And they have to make it all happen this year. Having been involved with lots of new product start-ups, I can tell you they have lots of challenges ahead of them. If everything does not work well, this will open the door for even more sapphire sales by Rubicon to Apple.

    Rubicon also reported the LED market for sapphire has started to improve. They had been premature about its growth curve in the past, but it appears to doing so now. Rubicon recently restarted more of its production capacity which reduces their costs due to improved efficiencies. So their profit margins are going up.

    The market price of 2" and 4" sapphire boules increased 10% recently and is predicted to increase again this quarter. Rubicon will benefit from this.

    There are lots of secular changes leading to a dramatic, and I believe permanent, increase in the demand for sapphire. As the world's largest supplier of sapphire (and perhaps with the best and lowest cost production technologies), Rubicon is benefiting from this jump in demand.

    There could be an incredible short squeeze soon on Rubicon shares. As of Feb. 14 Yahoo Finance says there were 8.67 million RBCN shares shorted out of a float of 18.44 million shares. If any (or all!) of the above starts to significantly shift business Rubicon's way soon the short sellers could be caught in a tight short squeeze. This will really drive up RBCN's share price.

    Bottom line, ikarus, is RBCN really a short position you want to get in on? The risk for short sellers here is huge.


    Disclosure: Long RBCN
    Mar 8 10:35 AM | 1 Like Like |Link to Comment
  • Prospect's Growth Hides Bad Underwriting [View article]

    Great article supported by great detailed analysis and data.

    The biggest concern I have is how PSEC management touted its quality of lending but was not directly forthcoming when client situations went bad. Repeatedly stating they have not had any loans go non-accrual in six years (by converting them to equity and then writing them off quietly) is just wrong, way wrong. Not illegal, but certainly pushing the boundaries of ethical reporting.

    Not trusting management really makes me question my PSEC investment, which is one of my biggest holdings. It is too bad, too, since I thought they had a perfect lending company and a top quality organization.


    Long PSEC, but may scale back my holdings significantly unless management responds to their bad reporting approach.
    Mar 3 04:09 PM | 4 Likes Like |Link to Comment
  • Resolute Energy's Big Q4 Earnings Surprise: Stock Should Be Propelled 25% Higher Within 6 Months [View article]
    Very nice analysis. Detailed and comprehensive over the critical aspects of REN. Thanks for doing this good work.

    Mar 2 10:11 AM | 1 Like Like |Link to Comment
  • Buying Windstream For Its Dividend Might Be A Waste Of Money [View article]
    Yahoo Finance ( ) says WIN's expected earnings are supposed to increase 20% from 2013 to 2014. At the bottom of the same Yahoo page it projects a 20% decline in earnings over the next five years. To go from a 25% increase to a net 20% CAGR decline over five years would take an almost collapse of their revenues, in my estimation.

    Windstream has changed their business model significantly through the Paetec (business services) acquisition, data center additions, Internet access and IP television services, fiber-to-the-tower service for wireless customers, and extension of their nationwide fiber network. There is no doubt Windstream's traditional consumer wireline business has declined significantly over the past five years, but the great majority of that decline has been offset with new services. I do not believe their revenue or earnings declines going forward will be anything close to 20% per year.

    WIN has been slowly reducing its total debt and extending its debt maturities at today's lower interest rates. It expects $45 million in reduced interest expense in 2014. It has completed most of its fiber-to-the-tower project capital spending so now it should receive more income servicing the wireless companies while minimizing its spending here. Its upcoming staff reduction will significantly decrease its 2014 expenses as well. Overall its cash flows should stay about steady or improve over the next five years, not decline, I think. I guess that is why I am long WIN and plan to buy more at the very attractive level it is at today.

    Feb 25 10:38 AM | 7 Likes Like |Link to Comment
  • Windstream: Should You Buy This 12% Yielder? [View article]
    Just to add a little more data to this discussion, WIN paid down ~$155 million in debt from 12/31/11 to 12/31/12 (per Yahoo Finance numbers). And it continues to decline since then. They also extended certain debt maturities recently which will result in approximately $45 million in cash interest savings in 2014 (per their recent earnings statements).

    So while WIN is highly leveraged, which is a serious concern, their debt load is coming down and they will be paying lower interest rates. I think their $1 dividend is maintainable for a good while at least.

    Disclosure: Long WIN
    Feb 19 12:10 PM | 4 Likes Like |Link to Comment
  • Windstream Holdings: Level Of Equity Threatens Dividend Yield [View article]

    A quick look at Windstream's historical dividend announcement dates ( reveals they have never been consistent with their first quarter dividend announcement date.

    In 2010 they didn't announce their March dividend until February 17. In 2011 they didn't announce until February 9. February 9, 2014 is a Sunday and very few companies announce on the weekend.

    I think the variation in announcement dates is more a matter of when the board of directors and top management meets for the quarter. It can be a challenge to wrangle all those folks together for a regular meeting, I imagine.

    I think good analysis as to whether a company, such as Windstream, can afford its generous dividend is critical to any buy or sell decision. By my calculations they had a 56% free cash flow dividend payout ratio last quarter, which is pretty secure. Windstream has completed the majority of the capital spending required for its fiber-to-the-tower program so its CapEx spending should continue to decline while it maintains the additional revenues from selling those services to the wireless industry. This should also help its cash flows and its ability to pay its $1 dividend.


    Disclosure: Long WIN
    Feb 9 09:49 AM | 1 Like Like |Link to Comment
  • Peregrine Semiconductor Takes A Hit, But Is It Warranted? [View article]

    PSMI has patents on the silicon on insulator (which until now has been all sapphire). They are currently suing RF Micro and others now for violating those patents. If PSMI wins the case, which is supposed to go to trial in November, they will block some other suppliers from using this technology.

    Sapphire has many advantages over silicon, including better thermal expansion properties, shock resistance, strength (it is the second hardest material after diamond), etc. It works well in tough environments, including by some consumers who are tough on their mobile devices.

    Long term PSMI is working toward integrated front end chips for hand set manufacturers. They say there will be more functionality and capacity in a smaller integrated chip. I believe they will be one of the first, if not the first, to have this capability. Given the explosion of data usage and smart phones of all sorts the wireless companies may drive the use of these kinds of chips.

    If you look at the product history of PSMI you will see a regular stream of new chips that appear to have significant performance advantages. (Unfortunately I do not have the depth of knowledge of how much better they are than existing products from other competitors, but they sure seem to offer some significant benefit for the markets they serve.)

    Getting new components into electronic products is not fast (due to the time needed for design, trialing, testing, etc.) But once a component is spec'ed in, the OEM is very reluctant to swap it out because of the cost and effort required to do so (and because they are typically swamped with work on the next new product). I believe PSMI has many of its components in the spec'ing in process for many OEMs so they should have a stream of new sales building over time. Of course PSMI can not say how many or who is testing their products, but they have said this process is happening.

    With PSMI's good gross margins only modest incremental sales growth will drive significant additional EPS. They have also said they are working on improving their gross margins even further, which is another positive for the long term.

    Overall, I believe PSMI is a technology company with competitive patented products growing into a booming industry that really needs their features and benefits. It has no debt, is very reasonably priced in the stock market, and keeps its shareholders aware of its status and developments. Over time I think it will be a multiple bagger and/or will be acquired.

    Disclosure: Long PSMI
    Jan 22 03:38 PM | 1 Like Like |Link to Comment
  • Windstream Holdings: Level Of Equity Threatens Dividend Yield [View article]
    No, Pim, WIN pays its dividends out of cash flow, not out of equity. For taxpayers this is considered a return of capital. This converts my dividends from qualified dividends (which I have to pay income tax on) to an eventual capital gain (due to a lower cost basis) when I sell my shares. (Or if my kids inherit the shares, the WIN shares get costed back up to WIN's current share price and my kids get another ~9 years' worth of tax-deferred returns of capital!)

    WIN can continue paying its $1 dividend forever as long as they have the cash flow to do so. They do not have to have an equity reserve.

    We love the ~12+% return, most of which is deferred tax return of capital.

    Dec 27 02:33 PM | 1 Like Like |Link to Comment
  • Rubicon Technology: Fundamentally Flawed [View article]

    Thanks for sharing the information about the hyperion ion cannon. I had not known about it before reading your post. It looks like some very interesting (and perhaps challenging) technology.

    For folks interested in reading about it, here is a pretty good article link:

    It will be interesting to see how this new technology melds with sapphire and how these laminated sheets get incorporated into new products.

    I believe while GTAT's furnaces might be able to produce 200+ KG boules, I do not think their boule costs will be as low as RBCN's. Once GTAT gets the ion cannon working efficiently and they figure out the lamination process for sapphire and glass, they will likely have the cost advantage over RBCN for handset-sized screens. Having been involved with lots of new product development (and all of its issues and challenges) I am sure this will take some time and serious effort.

    Great posts on this topic. Always good to see good analysis supported by data and logical thought (as opposed to the plentiful emotional screes on many message boards).

    Dec 24 10:06 AM | Likes Like |Link to Comment