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  • Intel reportedly in talks to buy Altera; shares soar [View news story]
    Tom,

    It's going to be hard for ALTR to get its FCF back up to its 2010 peak level of $900 mil. from its current $600 mil. level. We're now already halfway through the decade, and Altera is not there yet, not even close. 50% jumps in FCF are not easy achievements as you believe. Intel's FCF itself has shown 0% growth in FCF for the past 6 years straight, and both INTC's and ALTR's stock prices today are the same as they were 16 years ago in 1999. It'll take a miracle for either ALTR's or INTC's FCF to show any significant growth. The odds of one miracle happening are infinitesimal, but the odds of two miracles happening together are exponentially even smaller.
    Mar 28, 2015. 06:56 PM | 1 Like Like |Link to Comment
  • Intel reportedly in talks to buy Altera; shares soar [View news story]
    Tom Armistead, ALTR fell 40% from $50 to $30 in 2011 because its FCF got cut almost in half from $900 mil. to $500 mil. While the 2010-2011 run-up from $20 to $50 was impressive, ALTR wasn't apparently able to sustain its $900 mil. FCF for long and thus the 40% decline in 2011. Now, if the argument is that the Intel deal is merely going to return ALTR to its 2011 heyday before it fell off a cliff, that's anticlimactic since there's no net positive growth but only a return to a previous state. But even that is unlikely since Altera's growth has been mediocre since 2011. And paying a 2.0 PEG ratio for an improbable turnaround is imprudent, to say the least.
    Mar 28, 2015. 06:23 PM | Likes Like |Link to Comment
  • Is Intel Corporation An Investing Opportunity? [View article]
    Vlad and Bruce, if all of that is true, why doesn't it ever show up in the numbers? When Intel reported its numbers for the December quarter, I specifically looked for the overall improvement that you speak of but, alas, FCF just stayed flat as usual. Stock prices will always follow FCF growth.
    Without FCF growth, stocks flatline as Intel has deservedly done for the past 15 years.
    Mar 28, 2015. 05:23 PM | Likes Like |Link to Comment
  • Intel reportedly in talks to buy Altera; shares soar [View news story]
    Tom Armistead,

    Altera's FCF just grows 10% a year, and Intel's FCF growth over the past 6 years is 0% a year, so it's doubtful the combination of Altera and Intel is going to result in anything other than continued mediocre growth for both. Altera grows its FCF by $50 mil. a year which, when added to INTC's $10 bil. in FCF generated every year, represents only a 0.5% incremental additional growth in FCF for INTC. This deal does not move the needle for Intel at all. It is actually a net negative since Intel is wildly overpaying for this measly 0.5% addition to its FCF growth every year. As investors examine this deal further in the coming weeks, this will become apparent.
    Mar 28, 2015. 05:05 PM | Likes Like |Link to Comment
  • Intel reportedly in talks to buy Altera; shares soar [View news story]
    Ideal, but Intel is already flubbing its Altera foundry business, which will just hurt Altera more if Intel forces Altera to continue being its foundry customer through this deal. Altera would be better off with TSMC. Intel hopes its new foundry business can offset its declining PC business, but its foundry business is very incompetent and newbie-ish, and Intel is making a huge mistake trying to force Altera to remain its foundry customer through this deal rather than improving its foundry business and attracting foundry customers on the merits.
    Mar 28, 2015. 04:54 PM | 1 Like Like |Link to Comment
  • The Future Of YouTube Is Good For Google [View article]
    With falling margins, Google's P/E will fall and investors will flee. This is good and inevitable. And no one will pay for YouTube subscriptions, especially teenagers with no money. They'll just get free videos elsewhere if YouTube ever decides to charge.
    Mar 28, 2015. 04:42 PM | Likes Like |Link to Comment
  • Why Google Should Acquire Level 3 To Grow Fiber [View article]
    Excellent points. Google pays the carriers 75% of its 30% cut of Google Play revenues as a bribe to sell Android phones.
    Mar 28, 2015. 04:37 PM | 1 Like Like |Link to Comment
  • Intel reportedly in talks to buy Altera; shares soar [View news story]
    ALTR's capex is already very minimal at just $40-45 mil. a year. Intel's paying a near-100%, $5-6 bil premium to save just $40-45 mil. in capex makes no sense. It's just Intel execs gone wild and wildly overpaying for mediocre growth.
    Mar 27, 2015. 05:52 PM | Likes Like |Link to Comment
  • Intel reportedly in talks to buy Altera; shares soar [View news story]
    Unfortunately for Intel, it appears they're massively overpaying for Altera. Altera is only worth about $7-8 bil. given its $600 mil. in FCF growing at just 10% a year. But Intel looks like it's going to pay $13 bil., i.e. a P/E of around 20 and a PEG ratio of 2.0. Paying almost double what Altera is worth is a sign of severe managerial malaise and desperation at Intel and will depress Intel's stock price even further for the rest of this year.
    Mar 27, 2015. 05:21 PM | 4 Likes Like |Link to Comment
  • Google: 5 Big Reasons I Would Not Own It [View article]
    When calculating Google's free cash flow, it's important to subtract stock-based compensation, since this was just Pichette's way to make FCF look less worse than it actually was. So in 2014, Google's cash flow from operations was $22 bil. and capex was $11 bil., so FCF looked like it was $11 bil. But in actuality, there was $4 bil. in stock-based compensation that artificially jacked up the $22 bil. cash flow from operations figure by $4 bil. (so cash flow from operations was really $18 bil., not $22 bil.). So the proper FCF figure is just $7 bil. in 2014 ($18 bil. CF from operations - $11 bil. capex). $7 bil. is $1 bil. less than the $8 bil. FCF in 2013. This year, FCF is headed to just $5 bil. and a 90x multiple on FCF as stock-based compensation and capex continue to go through the roof. Google is a ticking time bomb of massive overvaluation, and although Porat was brought in to put lipstick on the Google pig, it is still a pig.
    Mar 27, 2015. 01:37 PM | 1 Like Like |Link to Comment
  • The Future Of YouTube Is Good For Google [View article]
    The future of YouTube is bad for Google because it'll cause Google's margins to decline. YouTube is not profitable now but just break-even due to soaring content and infrastructure costs. These variable costs have been unpleasant surprises in YouTube's growth story. In addition, with ever greater competition now, YouTube will always remain a low-margin, high-capex business that brings down Google's margins.
    Mar 27, 2015. 01:22 PM | Likes Like |Link to Comment
  • 11 Points A Somewhat Bearish Long Has Wrong About Google [View article]
    Google's FCF is about half its net income, and Google's FCF in 2014 was just $7 bil. down from $8 bil. in 2013 and on its way further down to $5 bil. this year and an insane 90x multiple on that FCF. Google has struck out on all its moonshots from Glass to YouTube (which turns out to be only break-even), and its wasteful cloud ventures are even more cash flow-negative than YouTube. The beauty of search was it was both high-margin and capital-light, but all Google's moonshots now are low-margin and capital-intensive especially cloud and Fiber, so Google's margins and overall finances will gradually deteriorate over time and the stock will tank because of this and massive overvaluation.
    Mar 27, 2015. 10:36 AM | 2 Likes Like |Link to Comment
  • Is Intel Corporation An Investing Opportunity? [View article]
    Intel's FCF has been $10 bil. for the last 6 years straight, so it's very unlikely it's going to increase 25% this year to $12.5 bil. as the author suggests. The CEO already said the PC business will be lousy this year, so if anything FCF will fall below $10 bil. this year. There were indications DCG also began to slow down earlier this year, so Intel's two main businesses will underperform this year. When FCF does not grow, the intrinsic value formula is $10 bil. FCF / 10% discount rate = $100 bil. At a $143 bil. market cap now, INTC is 43% overvalued and is headed down to its fair value of $21. The rise from the low-$20s to the high-$30s during 2014 turns out to have been pure hype because there was no corresponding increase in FCF during 2014. FCF was just $10 bil. in 2014 where it's been for most of the past decade and lower than what it was back in 2009. Intel missed the boat on mobile completely and continues to pay for it.
    Mar 27, 2015. 10:03 AM | 5 Likes Like |Link to Comment
  • Apple: Debunking The Recent Cowen Survey [View article]
    Blair, with Samsung's profit share down to 10% now from 47% two years ago during the Galaxy S3's heyday, it's safe to say Android-to-iPhone switching has been massive over the past two years. In addition, last quarter Samsung's mobile division reported a 64% decline in FCF to $2 bil. while Apple's FCF in that quarter alone exceeded $30 bil., which is more than what Microsoft or Exxon makes in an entire year! Thus, you can feel assured Android switching has been massive and unprecedented. Things will only get worse for Samsung as the iPhone juggernaut only gets stronger and also Chinese Android OEMs continue to undercut Samsung all over the world.
    Mar 26, 2015. 09:00 PM | 1 Like Like |Link to Comment
  • Apple: Android Photography Is About To Take A Huge Quality Jump [View article]
    Well, this latest one is the fan that has suddenly stopped working, and repair cost is half of the cost of the PC. The previous one was overheating because of insufficient vent holes on the top of the PC. A few previous ones were hard disk failures. And on and on. So I'll buy a few MacBooks and an iMac to go along with the iPhones and iPads we already have, completing our transition. Our iPad 2 is 4 years old and still going strong along with its power cord.

    I've bought Windows PCs for most of my life and remember the good old days when they would last a good 5-6 years, but quality and reliability seem to have gone out the window in the past 5 years. It's a very noticeable deterioration in reliability. I think the 1% margins of the Windows PC makers definitely have something to do with it. Android phones are headed for the same unreliable fate if they're not there already since their margins are even lower than 1%.. As more people realize Android is junk, they'll defect to Apple as I'm defecting to Macs forever from crap Windows PCs. It's an inexorable trend. Quality wins out in the end. No more sending defective products at my own expense to Koreatown NJ for me.
    Mar 26, 2015. 06:13 PM | Likes Like |Link to Comment
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