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Mr Spacely

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  • Is Intel Trying To Hide Its Mobile Troubles? [View article]
    Im GM. I sell cars and trucks. All these cars and trucks use similar engine configurations, interior components and other vehicle systems. I dont just report X number of cars and Y number of trucks. I tell you the specific number of each make and model.

    Intel doesnt have to break out every item they sell, but you would think that if mobile is such an important market they would break it out, if it was doing well. This is a clear attempt to hide their sh!tty results. Good on Bill Maurer for calling them on it.
    Apr 7, 2015. 11:02 AM | 9 Likes Like |Link to Comment
  • Zebra: The Motorola Enterprise Unit Is On The Right Track [View article]
    2 things

    1. An acquisition of this size and complexity takes well more than 1 or 2 qtrs to integrate. If they do it right and fully integrate, it will take at least a year until we can see whether or not it works. Despite mgmt’s bullish comments, I think I’ll wait a few more qtrs to make my own call.

    2. From your article "Importantly, the risk/reward appears attractive. The downside risk is limited as expectations for Enterprise are pretty low. But should Zebra succeed in reviving the business, the value creation potential would be huge in light of the company's high financial leverage."

    How can leverage provide such huge upside but not any downside? It can't. The reward of leverage is equal to its risk. You say downside is limited because of low expectations. Hardly. Expectations can be wrong and will no doubt be lowered if they have a bad qtr. They now have a very large interest payment that needs to be mailed out every qtr. They already have a cash headwind from elevated uses related to the integration and restructuring and if MOT results continue to decline, they could quickly find themselves in a liquidity crunch. In that case, your downside is enormous.

    I’m not saying that is going to happen, but the risk of the integration is still very real and significant and is in no way behind us.
    Mar 26, 2015. 01:57 PM | Likes Like |Link to Comment
  • Why Worry About Your Investment In Annaly Capital? [View article]
    Great article. To sum it up “R E L A X”. I too have been an owner of NLY for several years. The dividends I have received over that period have pretty much paid for the investment, i.e. a 100% return.

    This is a levered mortgage portfolio. Live by leverage, die by leverage. But if you know that going in, you shouldn't be surprised. There are many specialty finance companies whose entire business model is predicated on leverage. That doesn’t generally make them bad investments. Some are but some are not. It is the investor’s job to research and understand the company and its risk and then make a call on whether those risks are appropriate for their situation.

    When I look at companies like this, I know that rate movements can have large impacts on the results. I also know that other than the Fed who can print money and use their balance sheet to affect rates, nobody has any good insight to where rates are going. Even the Fed's control mechanisms are weak. Since no one can control or predict rates, the key aspect to analyzing these types companies is mgmt's philosophy on leverage and how they react to those rate movements. Specifically, how they hedge, their duration, their prepayment risk, etc. The 7x leverage quoted above may sound high, but on a relative sense it’s fairly low. Other mReits are higher. The auto lenders, GM Financial, Ford Financial, Ally, etc, also have equal to higher leverage.

    The history and success of NLY’s mgmt team’s decision making gives me comfort in this name. With NLY trading at one of the highest discounts to BV in the sector, it looks cheap.
    Mar 6, 2015. 09:53 AM | Likes Like |Link to Comment
  • Seadrill And Rosneft: Does The Dividend Elimination Signal A Catastrophe? [View article]
    The go private makes sense but it all comes down to capital. How does it get funded? does JF add more equity from his personal cash? Does he lever SDRL ad/or NADC? If so, how does he fund future acqs? Does he even need to consolidate?

    Also, if Rosneft is at risk, it makes sense to pullback hard, delever and derisk in order to be able to ride out the downturn.

    This all hinges on your outlook for oil consumption. I personally don't think the fundamentals have changed drastically. Granted, there are new near term fluctuations, eg sanctions, more US oil, Libya, but the big picture isn't materially different. I think oil consumption continues to grow and once ROW catches up with US economy, this will just be a bump in the road.

    This doesn't mean I'm bullish on SDRL especially because of the concentrated ownership, but there are opps in the oil patch to make big money.
    Nov 29, 2014. 12:59 PM | 1 Like Like |Link to Comment
  • General Motors' Problems Are About To Get Worse [View article]
    This would make sense if you only looked at Sept data AND only GM in a vacuum. The reality is that GMs recall experience earlier in the year opened a Pandora's box for recalls across the industry. Why didnt the market react? Because every OEM is recalling just about every car right now. GMs experience has spooked OEMs so badly that they are overcompensating creating a "kitchen sink" effect. Might as well recall everything now while people are more desensitized to it than to prolong it. On top of that, this reflects a new industry norm and shift in quality. In the past, OEMs would wait until a flaw became noticed by users before they reacted because they were reluctant to spend the money to fix the issue and feared brand retribution. Today, they can appear proactive by stopping sales and fixing the problem before the product saturates the market. And finally, I think customers are saavy enough to realize that defects are part of the car making process and that as long as the defect doesnt kill you and the company is willing to fix it for free, they are tolerated.

    More specifically to your argument, Sept did show outperformance by GM vs the industry, but go back over the course of the year and GM was actually losing share. Sept was a big launch month where they put a lot of new product into the market and so its natural to see a spike in their volume. Another item to note is incentives. They may be offering 25% loyalty discounts, but their overall average incentive has not moved much beyond ~$3000 per vehicle. And this is actually below their peers. In August, GM's incentives grew 2% while the market grew 20+%. In September, incentives grew 13.0% y/y vs. +20.0% y/y for the industry overall. So if anything, GM is lagging the market on incentives. In fact, their Sept ATP (avg transaction price) increased $1200 vs August and $2500 y/y. This is also driven by mix, ie more trucks and SUVs, again making sense since the new K2XX based SUVs Tahoe/Yukon/Suburban/E... launched in Sept.

    So yes your points are valid if GM was in a vacuum, but when viewed from the perspective of the industry as a whole, you can see that GM isnt in any bigger of a bubble than its peers nor is it "buying" the volume with incentives.

    My biggest concern for the entire industry is what happens when rates move up. Most buyers make their decision based on their monthly payment. At 0% financing, you can afford a lot more car than at 4 or 5%. When rates go up, and depending on how fast they go up, there could be a massive and violent change in the selling numbers.
    Oct 16, 2014. 11:47 AM | 3 Likes Like |Link to Comment
  • Intel Jumped The Shark, Time To Sell [View article]
    Thats about 2.5% of MV and about 2.5% of float if my numbers are correct. Not huge numbers. It is also roughly 127m shares. There are 121m shares of restricted stock owed to employees. Look like they are doing what every tech company does, issue shares to employees then use shareholder money to buy back an equal amount. They dont care at what price, they just need to offset the stock based comp because otherwise, diluted EPS will go down. Just sayin
    Oct 15, 2014. 05:14 PM | 2 Likes Like |Link to Comment
  • Intel Jumped The Shark, Time To Sell [View article]
    DCG growth comes from FPGAs meaning that Intel has to sell an Altera chip next to their chips to get the likes of Facebook to want to buy them. Has to be lower margin, no?
    Oct 15, 2014. 03:44 PM | Likes Like |Link to Comment
  • Intel Jumped The Shark, Time To Sell [View article]

    The flip side is that contra revs roll off and Intel realizes they cant sell tablet CPUs without paying the OEMs.

    Thats what I dont get about their whole buy the market strategy. x86 has its limits in a tablet. Just because you can buy the OEMs doesnt mean you can buy the customers. If these tablets dont perform, they'll go the way of the Surface
    Oct 15, 2014. 03:42 PM | Likes Like |Link to Comment
  • Microchip Technology: CEO Flubs A Warning Announcement [View article]
    @ Retired, Umm actually, you have it completely wrong. When did I ever say I invest based on a press release. There is something called the Mosaic Theory in finance where you come to do a decision based on many inputs. This press release is one of many inputs. My comments on China were based on my knowledge and research. And so when a CEO says he sees slowing in China, I listen. Apparently so does the rest of the market since most chip stocks sold off heavily on the news. The OP seems to think he knows better and that the market was wrong. And he calls Sanghi an arrogant know-it-all. A classic sign of an overinflated ego is thinking your direct experience trumps everyone else's knowledge.

    But this is irrelevant. Contrary to another poster's comment, I am not a MCHP fanboy. I could care less about MCHP. I dont care if MCHP's statement about the channel is true or not but I dont assume that a CEO is blatantly lying when he issues a press release.

    MCHP sells to a wide variety of end users for a wide variety of end applications so their products spread out across a broad spectrum of the global economy. And because they record sales on sell-through, their sales are indicative of broad end user demand unlike a XLNX or ALTR who sell to more specific parts of the market. Is MCHP the only indicator? Obviously not. But when they arent seeing the end customer show up, I take note.

    FWIW, here is another data point. This is an excerpt from a Pacific Crest Securities report dated Oct 12. They just recently did a trip to Asia to check distributors.

    "Weak China Demand Results in Correction at Asian Distributors
    Supply chain conversations indicate double-ordering and weak end demand in China resulted in excess distributor inventory. While lead time extension was the impetus for distributors to increase order activity and provide strong backlog coverage, it is evident 2H forecasts were inflated to secure product. Given weak demand in industrial, home appliance and automotive, distributors reduced internal inventory levels by ~2 weeks;
    specifically, distributors noted reduced Q4 orders to FSL, MCHP and ONNN.

    We See a Significant Air Pocket in LTE Base Station Demand in Q4
    Despite expectations for a higher base station target of 700K at CHL, supply chain partners are skeptical demand will achieve these levels. Equipment suppliers indicate CHL is tendering its phase 3 deployment (400K), which is not anticipating deployments until 1H15. We see a significant air pocket in Q4 demand due to delays of the full FDD LTE license, prompting lower estimates for ALTR, XLNX and CAVM."

    I am a serious investor. I do not invest on emotion or opinion. I was simply annoyed at the poorly formed logic of the OP and the arrogance oozing from his opinion and then having the hutzpah to call Sanghi arrogant. But what really bothers me is all the subsequent posters praising him for his insightful work.

    Once again, the OP lacks credibility. His whole argument was that Steve Sanghi is an arrogant CEO who wanted to steal the spotlight. And the OP was assured of this because he "know(s) Steve Sanghi and ha(s) deep experience with Microchip Technology". He is wrong, plain and simple. There is nothing insightful about his article. It is petty and appears to be written out of spite
    Oct 13, 2014. 09:30 AM | 4 Likes Like |Link to Comment
  • Microchip Technology: CEO Flubs A Warning Announcement [View article]
    Did you read the press release or are you just bitter about being fired from MCHP?

    The forecast was lowered because of weaker sales in China. The typical pattern of weak August and strong September didnt happen. Maybe that was self-inflicted, IF, others like XLNX and MXIM didnt already comment about a weakening China in July and China wasnt in the midst of an enormous LTE buildout that was started a few qtrs ago which would make a pause in Sept highly probable and liekly. Every analog chip maker has been talking about China LTE buildout and the impact it had to sales over the past couple qtrs and the possibility of an inventory correction in 2H14.

    In addition, show us where you found your info about sell-to. From FSL 2013 10K "We also use distributors for a portion of our sales and recognize net sales upon the delivery of our products to the distributors." Sounds like sell to. From NXP 2013 10K "For sales to distributors, revenue is recognized upon sale to the distributor (sell-in accounting)." Sounds like sell-to. Need I go on.
    Oct 10, 2014. 12:25 PM | 4 Likes Like |Link to Comment
  • AMD: Su Hire Shows How The Game Has Changed [View article]
    This assessment totally misses the mark. The stock tanking has nothing to do with her gender. It has to do with the timing. This was unexpected so people read into it and are speculating that this happened today because of a massive disagreement or a massive shortfall in numbers.

    I think this is shortsighted and wrong. If you agree, then this is a good buying opportunity.

    Lisa Su has been pursuing a CEO role for a while. She ran a large and important group at FSL but wasnt in line for the top job and so she left. As Rory said on the call yesterday, this transition was part of the plan from the beginning. And nothing from the tone of the call suggested this was a contentious transition. It lasted an hour and both ex CEO and new CEO shared speaking duties something they have done on earnings call for a while now. If there was more at issue, it would have been a different call. Also, the qtr is over, they know what the numbers are. If they were going to miss badly, they would have announced it and blamed it on Rory
    Oct 9, 2014. 11:48 AM | 3 Likes Like |Link to Comment
  • Nuance: It's All About The Debt Redemption Baby [View article]
    You missed an important point in the Q&A and in the cvt doc that blows your argument out of the water

    The bonds become putable on August 15. With them way out of the money and with a low interest rate, the company is expecting that holders will put the bonds to company. Whatever principal that remains after that transaction, will be called in Sept. So the call is simply a way to clean up whatever bonds that dont get put.

    I personally think a sale is out of the question. First it would be messy. This company really is 4 separate companies that share a technology. Samsung could integrate a lot, but much of what NUAN sells is to competitors of Samsung, so if they were to buy it, it would be to bring the tech in house. They would no doubt lose a significant amount of current customers & rev who didnt want to be buying from Samsung. That means the value to Samsung is less than the value in the market today. But more importantly, if mgmt believes that they are at the beginning of a large ramp in revenue and profits, why sell at the bottom.
    Aug 14, 2014. 10:10 AM | 1 Like Like |Link to Comment
  • One Simple Reason Why AMD Can't Compete [View article]
    I didnt say INTC isnt taking share, I said the share issue in the low end did not drive their Q2 results.

    You countered your own argument and provided claim to mine.

    "There is no evidence that their falling R&D spending is increasing revenues." Not yet. But they have repeatedly said they will announce 1-2 new deals this year and next. IMO, this team has largely underpromised and overdelivered. They have done everything they said they would. Get 40% non PC revs by YE 14. Yes. Maintain $1 bln cash balance. Yes. Generate enough cash to cover the GF WSA fee. Yes. I'll be honest, Rory doesnt instill much confidence in me, but they have done what they have said they would do. And I am betting that they wouldnt tell us about 1-2 wins per year if they didnt have good line of sight to that. The very nature of embedded applications creates a long design in which means they are probably developing the product now but cant tell us about it. They basically said as much on a recent call. They said the customer wont allow them to discuss it until they announce it. Sounds to me like they won that deal. The question remains how much rev it will produce, but its proof that their R&D is leading to new rev streams
    Aug 8, 2014. 10:10 AM | 2 Likes Like |Link to Comment
  • One Simple Reason Why AMD Can't Compete [View article]
    How does that make sense? Thats ridiculous. A company can only spend a portion of their revenue on development. Every dollar has a return on investment and every decision is based on the that return expectation. Absolute dollars are irrelevant. AMD will spend $1 today to presumably get $2 tomorrow. NVDA and INTC will likely do the same. But if AMD only has $10 to spend and NVDA has $15 and INTC $20, there is no way AMD can spend more than $10 or even should. The argument only makes sense if AMD has $15 to spend but chooses to spend $10. Since the rollout of the game consoles in Q3 last year, which corresponded with their restructuring, R&D in absolute dollars in down less than 10% annualized. But if you factor out the game console revenue, which has hardly any R&D spend attached to it, you will see that their spending actually increased for the remaining businesses AS A PERCENT OF SALES.

    Plus you're missing my point. Level of dollars spent does not equal success. Quality of dollars spent does. Im not arguing that the quality of their spend is good or bad, I think that is yet to be determined, but the article implies that less spending equals less revenue and that's simply is not the case.

    Re INTC, Consumer does not equal low end. Yes, consumer as a % of total Intel is up, but nowhere did I read anything about their share of the market especially in the low end. And sure Bay Trail has allowed them to enter new segments but that doesnt say anything except that they didnt have a (competitive) product in that segment before. And it may now be 60% of their low end chips, but why would they design a new chip not sell it. It will naturally take more share of that product class. Nothing in your quote says anything about share gains. It was a lot of numbers that might make you think they gained share. Obviously they gained something, but doubling from presumably zero doesnt suggest massive gains. Again, my point is not that Intel isnt taking share, but that the driver of the Q2 differential was the success Intel had in corporate sales where AMD had zero. You will need to remember this line of thinking in a couple qtrs when AMD says they doubled their sales in the corporate segment.
    Aug 6, 2014. 05:26 PM | Likes Like |Link to Comment
  • One Simple Reason Why AMD Can't Compete [View article]
    I don’t often say this, but here is why you are wrong.

    First, you look at absolute dollars, not percentage of sales. If you were to convert those dollars to % and graph that trend alongside NVDA and INTC over the past 5 years, which I did but can’t figure out how to post the graph in the comment, you would see that AMD and NVDA tracked each other closely regardless of the absolute level. They avg’d about 25% of sales per year until late 2011 when both started trending towards 30%. Since late 2013, AMD has dropped from 30% to 20%. Intel on the other hand, avg’d 15% R&D to sales until 2011 but now is around 20%. Presumably this increase since 2011 corresponds with the development of smaller nodes and the higher costs related to the shrink. But the larger point is that the graph confirms something that everyone who follows these companies should know, which is graphics R&D is more expensive and since AMD’s spend tracked NVDA’s, it suggests that AMD has spent the bulk of their R&D on the graphics side.

    Second, in saying they are slashing R&D, you disregard the fact that a large chunk of their current revenue comes from game console which were developed using shared R&D (NRE). That is why they were able to go from ~30% spending to 20% - Sony and MSFT picked up the tab.

    Finally, even if you look at it on a dollar level, just because they are decreasing dollars doesn’t mean they are spending less on each individual item. Note that their decreased spending corresponded with a new CEO and mgmt team who brought a new focus to the company. So, and this is just my speculation, it is easy to conceive that they previously were spending on a number of items, say 100, and now with a new focused mgmt team, they are spending on 50. The intensity of spend on those 50 probably increases, but the total should still drop. This makes intuitive sense to me and is actually something that I think mgmt should be doing for shareholders. Getting the best return for dollars spent. The old AMD was notorious for over developing and overspending. Maybe this new mgmt team brought some discipline and focus.

    One last thing, the reason why INTC sales were so strong in Q2 was due to a corporate refresh not because they took share in the low end. AMD has almost no presense in the corporate market but is overweighted in the low end. The low end got hammered (down 20%) but the corporate segment grew. Intel may be taking share, but that doesnt accurately describe why their results differed in Q2.
    Aug 6, 2014. 01:56 PM | 2 Likes Like |Link to Comment