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Mr Spacely

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  • Do Not Buy Annaly Capital, Yet [View article]
    There will always be opps to make money regardless of the level of rates. The issue is perception and equilibrium. People don’t stop buying houses because rates go up or because they are at a higher level today than they were yesterday. Rates are just one factor in the decision making. But as with all forward looking markets, it’s about perception. If you think rates will go up, you will probably buy today. If you think rates will be flat or down, you will probably hold off. If rates are at 3% and at equilibrium, people will buy and NLY can make money. If rates are at 6% and at equilibrium, people will buy and NLY can make money. It’s the transitions between equilibriums that create the heartburn and this is the point the OP was trying to make.

    Steve Luzco, the CEO of STX described this phenomenon perfectly. He said he can make money at $3bln of rev per qtr and he can make money at $2bln of rev per qtr but he can’t make money if he thought it was going to be $3b and he only does $2b.
    Jul 2, 2015. 09:39 AM | 2 Likes Like |Link to Comment
  • Intel's 'Micron Problem' [View article]
    What caused the decline in MU’s stock was not PCs per se. PCs have been in decline for a few years so the trends are well known. What caused MU’s ~20% decline was their outlook for continued lower PC demand which forces a shift to more mobile and server which consume less bits and have lower margins. In addition they expect higher costs in the near term to ramp 20nm DRAM and 3D NAND.

    Lower rev at lower margins + higher production costs equals less future profits. The market was not expecting this (I would argue incorrectly) and so the stock sold off. Yes Intel will have problems, so will Nvidia and AMD, but Micron didn’t say anything to suggest that PCs are any worse off from what we already knew from all the existing data out there. What Micron said was that they will have problems unique to them that will lower future profits.
    Jun 29, 2015. 01:04 PM | 3 Likes Like |Link to Comment
  • Qualcomm May Acquire AMD: This Could Trigger Significant Upside For Both Stocks [View article]
    Its not clear whether or not AMD could sell the x86 license. My opinion is that the FTC would allow a sale of license because if not, it would give Intel monopoly power. This was somewhat addressed in their case a few years back. At worst, the FTC left the door open.
    Jun 24, 2015. 10:22 AM | Likes Like |Link to Comment
  • AMD's Financial Analyst Day: What Did We Learn? [View article]
    Exactly. I thought I said this in my first comment.

    They have 1.5% share right now in datacenters. Its not hard to see how a handful of wins could grow that share to 3.0% especially since AMD will target specific workflows and the not the entire datacenter. Apparently they already have customers asking them to re-enter the market so all they need is a competitive product which Zen appears to be. This small share shift would more than double their revenue since the market is growing.

    As for PCs, MY base case for AMD is that they continue to lose share as they exit the low end. Even the "new" Carrizo will be challenged. As they transition from low end with APUs to higher end/comml offerings with Zen FX, the growth from Zen will only modestly offset the declines from elsewhere.

    Said differently, in the datacenter the only place they can go is up but in PCs, they still have room to fall.
    May 8, 2015. 09:03 AM | 2 Likes Like |Link to Comment
  • AMD's Financial Analyst Day: What Did We Learn? [View article]
    @Ashari. You presume that PCs have stabilized but mgmt has said they dont know when they will, especially the low end where AMD has historically been concentrated. I view "flat to down" as somewhat positive since my base assumption was for further declines. To get to flat suggests they will backfill with new products. But to me, this is not a PC play. Intel will limit any AMD activity in PCs by buying its share. AMD realizes this and so wont spend their efforts or resources on trying to win back large chunks of PC share. They are going head on into the heart of Intel, the datacenter, and if Zen is what Papermaster says it is, they could make waves. Its not hard to go from 1.5% share to 3% which would be a huge win for AMD.
    May 7, 2015. 11:48 AM | 1 Like Like |Link to Comment
  • Analysis Of NCR's Lackluster Quarter And New Details Of Bad Capital Allocation Revealed [View article]
    You raise some valid points that investors should not overlook, but much of this analysis is grasping at straws and does not suggest the company is 70% overvalued. If I use the mosaic theory and look at the same information, I come up with a different conclusion. You make your money both selling short reports and shorting stocks. Enough said.

    Let me address some of your concerns.

    AR facility - You said in your prior report and again here that they report their AR facility in their cash from ops. The CFO said they report it in financing and you show in the slides above that they do indeed show it as financing. But yet your heading says its in cash from ops. It is not. What is included in the operations is the cost of the financing which is probably in the Other income line. I agree that they are not very clear by lumping it with their revolving facility but they do tell you about it. This may not be the best presentation but there are numerous companies that only show change in debt on the SOCF. NCR at least breaks out long term debt and short term. You were able to dig through the reports and find out all the numbers you needed. I too was able to do that and so too should everyone else. This is not a big deal

    Deferred rev – First and foremost, this is a balance sheet item so it’s a point in time not a rolling number. The absolute change from one point to another is not reflective of the underlying changes. Second, DI is the SaaS growth engine and despite the company saying it grew 20% yoy, DI was acquired in the middle of Q1 14. On a PF basis, DI grew ~$10m yoy. On a def rev balance of nearly $600m, that is a rounding error. Plus the company has so many revenue elements included in that def rev balance that you cant accurately make the conclusion you do. Third, I’m not an expert but there are a number of ways that cloud/SaaS revenue can show up in financials. The first thing to understand is what actually makes up cloud rev. Cloud is a loose term and means whatever the person saying it wants it to mean. Many people use the word cloud or SaaS but are actually talking about very different delivery models. Anyone following a Cloud/SaaS company knows the first thing to do is figure out exactly what they mean by the word. Your presumption is that def rev should grow in equal amounts to their bookings. But this is not the case. A booking does not equal rev and thus def rev. Let’s say they book a $1m contract. If they bill and collect a one year subscription, then yes, def rev should reflect the balance of the year that is left on this billing because they have collected the cash but not yet delivered the service. But if they bill and collect qtrly, then def rev will barely change because all the movement occurred intraquarter. Also, on the one hand you complain that the level of def rev didn’t change, but then agree that it contributed to cash flow. That says, as would be expected, they converted def rev to rev and then reloaded it with new sales. Again, nothing unusual here.

    Amortization of intangibles – “What we find unusual is that NCR splits these costs among three income statement categories: Cost of products, services, and SG&A.” You obviously don’t understand amortization of intangibles. These are from acquired assets. They can be related to software IP (Products), the value of a workers knowledge (services) or a trademark (SGA). And yes, these are costs of their acquisitions, but they are non cash adjs to the P&L. To get an accurate assessment of the earnings power of the current business it makes sense to exclude them. If you want to assess the success or failure of the acquisition there are other ways to do this, like ROA or ROIC.

    In the end, you raise some valid points that merit close watch by investors. NCR is not a very ethical company as evidenced by their long list of legal cases. But I don’t believe they are trying to deceive investors. In fact, most of what you call out, you were able to piece together through NCR's own disclosures. Their presentation may not be the best, but I think they offer a wealth of information in the notes of the statements that allow analysts to make their own adjustments. I would argue that NCR offers some of the better disclosure.

    I think like most F500 companies, they are big and unwieldy and have many competitive forces to battle which is never easy and fraught with peril. As long as they disclose those dangers, investors can make their own assessments. But thank you for pointing out some of the more egregious.
    Apr 29, 2015. 02:44 PM | 6 Likes Like |Link to Comment
  • 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