24/7 Wall St. » PC Companies

After The Fall: Value & Upside In Chip Stocks As Summer Heat Awaits (INTC, QCOM, BRCM, NVDA, AMD, TSM, MU, FSL, SNDK, AMAT, ALTR, LRCX, SMH, XSD, USD)

Administrator — Thu, 24 May 2012 15:51:47 +0000

The recent sell-off has been brutal to semiconductors and chip stocks of late. To make matters worse, investing in technology and semiconductors can be brutal during the summer months. Still, many investors believe that where there is risk there is also reward and trying to nail an exact bottom is no easy task.

With warnings having started from key leaders in the realm of chip stocks, the question is whether or not you can trust the analysts and the consensus upside. 24/7 Wall St. has gone in and evaluated the leaders in each aspect of the semiconductor sector to see where there is value and where the risks currently lie. We evaluated the following chip companies: Intel Corporation (NASDAQ: INTC); QUALCOMM Incorporated (NASDAQ: QCOM); Texas Instruments Inc. (NASDAQ: TXN); Broadcom Corp. (NASDAQ: BRCM); NVIDIA Corporation (NASDAQ: NVDA); Advanced Micro Devices, Inc. (NYSE: AMD); Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE: TSM); Freescale Semiconductor Holdings (NYSE: FSL); SanDisk Corporation (NASDAQ: SNDK); Applied Materials Inc. (NASDAQ: AMAT); Lam Research Corporation (NASDAQ: LRCX); and Altera Corporation (NASDAQ: ALTR).

In a further effort to show just how much these have sold off, we have shown the moves in the following key semiconductor ETFs: Market Vectors Semiconductor ETF (AMEX: SMH); SPDR S&P Semiconductor (AMEX: XSD); and the ProShares Ultra Semiconductors (AMEX: USD). We have also run the same screens in retail, gold and silver miners, conglomerates, industrial giants, and major oil companies with links to those at the end of this article. Here is the screening of value and upside in the chip giants:

Intel Corporation (NASDAQ: INTC) traded at $26.60 with a market value of $129 billion. The consensus target price for the king of PC processors from Thomson Reuters is $29.75 and the 52-week trading range is $19.16 to $29.27. This DJIA component’s most recent yield was listed as 3.2%. Intel’s implied upside to the consensus target is 16% and it is worth noting that the consensus target is just above the 52-week high.

QUALCOMM Incorporated (NASDAQ: QCOM) traded at $57.78 with a market value of $99 billion. The consensus target price from Thomson Reuters is $71.92 and the 52-week trading range is $45.98 to $68.87. The CDMA giant yields about 1.7% after dividend hikes. The implied upside to the consensus target is just under 25% but we would note that the consensus target is still over $3.00 above the 52-week high.

Texas Instruments Inc. (NASDAQ: TXN) traded at $29.15 with a market value of $33.4 billion. The consensus target price from Thomson Reuters is $35.80 and the 52-week trading range is $24.34 to $35.30. The yield here is about 2.3%. TI’s implied upside to the consensus target is just under 23% and that target is still just above its 52-week high.

Broadcom Corp. (NASDAQ: BRCM) traded at $31.85 with a market value of $17.5 billion. The consensus target price from Thomson Reuters is $43.21 and the 52-week trading range is $27.59 to $39.66. Broadcom has a paltry yield of only about 1.2%, but its implied upside to the consensus target is about 35%. Be advised that this consensus target is almost $4.00 above the 52-week high.

NVIDIA Corporation (NASDAQ: NVDA) trades at $12.25 and its market cap is just over $7.5 billion. This graphics processor leader has a consensus target price of $16.64 and the 52-week trading range is $11.47 to $20.05. NVIDIA pays no dividend and that is something which it should consider changing since it has about $3 billion in cash and liquidity. Its implied upside to the consensus target is about 35% and that consensus target price is well under its 52-week high.

Advanced Micro Devices, Inc. (NYSE: AMD) trades at $6.06 and its market cap is only $4.25 billion despite it being so actively traded. The consensus target price for this distant number-2 in PC processors is $8.55 and the 52-week trading range is $4.31 to $8.71. AMD has no dividend due to very spotty earnings. Its implied upside to the consensus target is more than 41% if you trust the analysts here and its target price is just under its 52-week high.

Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE: TSM) currently trades at $14.15 for its ADR and Yahoo! Finance shows its market value being about $73 billion. The consensus target price from Thomson Reuters is $16.70 and the 52-week trading range is $10.75 to $16.15. The yield is listed as roughly 2.9%. TSM’s implied upside to the consensus target is 18% and the consensus target is about 4% above the 52-week high.

Freescale Semiconductor Holdings (NYSE: FSL) has been battered since its IPO and shares now trade at $9.75 with an implied market value of $2.4 billion. This private equity backed chip outfit’s consensus target price from Thomson Reuters is all the way up at $17.92 and the 52-week (less than one-year actually) trading range is $9.43 to $20.97. Freescale has NO DIVIDEND, which makes it stand out against the peer group now. Still, if you trust the analysts here the implied upside to the consensus target is a whopping 83%! Trust is hard to come by here, particularly for a company where backers will sell shares along the way into strength.

SanDisk Corporation (NASDAQ: SNDK) trades around $32.50 and its market value is about $7.9 billion. The king of flash memory’s consensus target price from Thomson Reuters is $44.46 and the 52-week trading range is $31.34 to $53.46. SanDisk has no current dividend, something which may need to change down the road considering that this is not anywhere close to a new company. Its implied upside to the consensus target is 37% but the company has had two warnings.

Applied Materials Inc. (NASDAQ: AMAT) currently trades at $10.55 and its market value is $13.6 billion. The consensus target price from Thomson Reuters is $13.65 and the 52-week trading range is $9.70 to $13.94. Applied now yields about 3.4% and its implied upside to the consensus target is about 29%.

Lam Research Corporation (NASDAQ: LRCX) is worth more than $4.5 billion today but it is acquiring Novellus Systems, Inc. (NASDAQ: NVLS) for about $3 billion in stock, so it will soon be larger. Its shares trade at $38.00, its consensus target price is $48.53 and the 52-week trading range is $34.81 to $48.88. Lam Research pays NO DIVIDEND now and its implied upside is almost 28%.

Altera Corporation (NASDAQ: ALTR) currently trades at $33.90 and its market value is $10.9 billion. The consensus target price from Thomson Reuters is $41.00 and the 52-week trading range is $30.39 to $48.91. Altera has a dink yield of only about 1% and we expect a dividend hike in the coming weeks or months. Its implied upside to the consensus target is about 21% and this one is well off highs and the target is almost $8.00 under its 52-week high.

Market Vectors Semiconductor ETF (AMEX: SMH) has undergone a total transformation since it is no longer the Semiconductor HOLDRs. At $31.25 its range since the change is listed as $28.86 to $36.17. This ETF is said to have assets of almost $400 million, but that changes based upon inflows and outflows on top of the change in the price.

SPDR S&P Semiconductor (AMEX: XSD) ETS is now one of the longest ETF in chips since the HOLDRS changed. At $43.50 now, its 52-week range is $40.09 to $59.85 and it still has only about $44 million in assets. This one peaked in January and the mix of components has made it more volatile than many leaders. This ETF would now have to rally by more than 37% to hit its 52-week high again.

ProShares Ultra Semiconductors (AMEX: USD) uses leverage of 2-times for its semiconductor trading, so this is one where it will feel just like getting your fingernails ripped out when your timing is wrong. At $33.50, this leveraged ETF has a 52-week range of $26.18 to $46.46. It would have to rally about 39% to hit its 52-week high again.

As you can see, the semiconductor and chip leaders have now pulled back substantially from their highs seen throughout 2012. The issue to consider is that Dell Inc. (NASDAQ: DELL) and Hewlett-Packard Co. (NYSE: HPQ) have confirmed that PC sales are slowing. Some of this is due to Apple Inc. (NASDAQ: AAPL) and some of it is due to weakness in Europe, weak PC spending in the Americas, and a slowing of growth in the BRIC nations. How the Microsoft Corporation (NASDAQ: MSFT) launch of Windows 8 will impact the PC refresh cycle ahead is now another wild card since PC sales guidance is looking softer than anticipated from just a couple of weeks ago.

We also want to warn investors to not just blindly trust the analysts in semiconductor price targets here. Summer can be a brutal time for chip stocks. The drop in the ProShares Ultra Semiconductors (AMEX: USD) during the summer of 2011 was about 40% and the drop from the 52-week high in 2011 to that end of summer trough was almost 50%.

The drop in the SPDR S&P Semiconductor ETF (AMEX: XSD) during the summer of 2011 was about 25%, but the drop from the peak in early 2011 here to the trough of late-summer was about 31%.

Summer is a very tough time to invest in chip stocks, and the question now is just how much the slowdown is going to continue taking out of chip stocks. We would certainly avoid trying to play the game of trying to catch falling knives here, but these are all worth keeping an eye on for those inflection points where the valuations start to adequately discount the warning signs.

Gold & Silver Miners with the Most Upside Value

Major Oil Companies with the Most Upside Value

Industrials with the Most Upside Value

Conglomerates with the Most Upside Value

Retail Stocks with Upside

JON C. OGG

Filed under: Consumer Electronics, Dividend, PC Companies, Semiconductor, Technology Companies, Value Investing Tagged: ALTR, AMAT, AMD, BRCM, DELL, FSL, HPQ, INTC, LRCX, MU, NVDA, QCOM, SMH, SNDK, TSM, USD, XSD

H-P Escapes Dell’s Executioner… But Its Workforce Doesn’t

Administrator — Wed, 23 May 2012 20:52:56 +0000

Hewlett-Packard Company (NYSE: HPQ) is managing to escape the trap of Dell Inc. (NASDAQ: DELL) after earnings. Unfortunately, at least if you are a worker there, a decent portion of H-P’s rise after earnings may be tied to its announcement of a restructuring that is going to shed somewhere around 27,000 workers or about 8% of its workforce.

On an adjusted basis H-P turned in earnings of $0.98 EPS on total sales of $30.69 billion. This was above its prior guidance of $0.88 to $0.91 per share and above the consensus from Thomson Reuters of $0.91 EPS and $29.9 billion in revenues.

HP showed the following in PC and tech sales:

Personal Systems Group revenue was flat year over year with a 5.5% operating margin.
Commercial revenue increased 3%
Consumer revenue declined 4%
Workstations revenue was down 1%
Desktop units were up 5%
notebook units were down 6%
total units were down 1%.

Results elsewhere are as follows:

Services revenue declined 1% year over year with an 11.3% operating margin
Imaging and Printing Group (IPG) revenue declined 10% year over year with a 13.2% operating margin.
Enterprise Servers, Storage and Networking (ESSN) revenue declined 6% year over year with an 11.2% operating margin.
HP Financial Services revenue grew 9% year over year driven by a 4% increase in net portfolio assets and a 5% increase in financing volume.
Software revenue grew 22% year over year with a 17.7% operating margin, including the results of Autonomy… but it noted “Autonomy saw a significant decline in license revenue.”

HP spent $350 million of cash during the quarter to repurchase approximately 13 million shares of common stock in open market transactions and the company exited the quarter with $8.7 billion in gross cash.

Cutting another 8% of the workforce in the coming year or more is not going to come without pain. What is also helping is that the crummy news coming out of Dell caused Dell’s worst day in a decade or more and that set the bar very low for H-P. H-P closed down 3.2% at $21.08 against a prior 52-week low of $21.28, but shares are up 5.7% at $22.33 in the after-hours session.

Microsoft Corporation (NASDAQ: MSFT) is not winning with H-P perhaps on lower total unit sales. Shares closed down 2.2% at $29.11 and the stock is at $29.04 in the after-hours. Intel Corporation (NASDAQ: INTC) is facing the same after a 2.3% drop to $25.44 today and the after-hours session is down at $25.35.

JON C. OGG

Filed under: Earnings, Economy, PC Companies, Software, Technology Companies Tagged: DELL, featured, HPQ, INTC, MSFT

Dell Plays Wrecking Ball For Entire PC Food Chain (DELL, INTC, MSFT, HPQ, STX, WDC, MU)

Administrator — Wed, 23 May 2012 15:19:19 +0000

Dell Inc. (NASDAQ: DELL) was nothing short of a really bad earnings report. The wart on the nose is a declining margin, declining earnings power, and less and less revenue growth. With only 2% to 4% expected in sequential revenue growth, now the question comes up about accurate Intel Corporation (NASDAQ: INTC) was on its reiterated guidance recently and also about how accurate all of the predictions are in the coming Windows refresh cycle for Microsoft Corporation (NASDAQ: MSFT) and the coming launch of Windows 8.

When you see a drop of 17% on Dell, you might expect that the volume was 100 million shares or so. As of 11 AM EST we have still not even seen 40 million shares trade against an average volume of 16.5 million. The volume is strong, but this feels like the sort of news that would drive 100 million shares. That being said, Dell traded 51,440,000 shares per NASDAQ trading data on its last earnings report day-after.

Hewlett-Packard Co. (NYSE: HPQ) is set to report earnings today after the close of trading and estimates are $0.91 EPS and $29.92 billion in sales. Let’s just say that it is safe to assume that the estimates have unofficially come down significantly. H-P shares are down 4.6% at $20.77 and this is a new 52-week low. As a reminder, HP is expected to announce a major round of tech layoffs today as part of its restructuring.

This appears to be the worst trading day in more than a decade for Dell on a percentage drop. Dell is down 17.1% at $12.50 now and the prior 52-week range is $13.29 to $18.36. Dell is now probably under 6-times forward earnings estimates after the drop and H-P is roughly the same. The problem is that no one is willing to pay for contracting earnings power of this sort. Dell offers no dividend to entice shareholders to stay around, and HP offers at least a yield of about 2.2% based on today’s price.

Intel Corporation (NASDAQ: INTC) is down 3.2% at $25.19 and Microsoft Corporation (NASDAQ: MSFT) is down 2.9% at $28.90.

Elsewhere in key PC components, the fallout continues… Seagate Technology PLC (NYSE: STX) is down 2% at $25.81 against a recent high of $32.55 and Western Digital Corp. (NYSE: WDC) is down 2% at $33.82 against a recent high of $44.44. We warned investors not to chase those on the last round of good news as it should have been anticipated at the end of 2011 and in the first quarter of this year. It may seem a bit of a surprise, but the US king of DRAM via Micron Technology Inc. (NASDAQ: MU) is down only 0.2% at $5.70 because it is already down so much from the highs of $10.23 over the last year.

It goes without saying… wrecking balls swing back and forth, and the damage is severe. Dell has become technology’s wrecking ball and having a ”LOW P/E VALUATION” is about as relevant as gold to a dead man today.

JON C. OGG

Filed under: Consumer Electronics, Earnings Warning, PC Companies, Software, Technology Companies Tagged: DELL, HPQ, INTC, MSFT, MU, STX, WDC

Dell Dragged Down by Americas & Consumer; Sets Bad Tone For HP

Administrator — Tue, 22 May 2012 20:15:26 +0000

Dell Inc. (NASDAQ: DELL) is out with disappointing earnings and the report is going to sour the tone for Hewlett-Packard Co. (NYSE: HPQ) on Wednesday. Earnings for the PC maker and services firm came out as $0.43 EPS and that is short of estimates of $0.46 EPS from Thomson Reuters and short of the $0.46 whisper number. Revenues were also soft at $14.42 billion versus the estimate of $14.91 billion.

The guidance looks pretty bad too. Dell is targeting growth of only being up 2% to 4% sequentially and that implies revenues of $14.7 billion to $15 billion rather than the $15.42 billion expected. Ouch!

Dell said that Enterprise Solutions and Services revenue grew about 2% year over year to $4.5 billion. The company further noted that enterprise solutions and services businesses now account for 50 percent of its gross margin.

Large Enterprise revenue was $4.4 billion in the quarter, a drop of 3%; Public revenue was $3.5 billion, a drop of 4%; Small and Medium Business revenue grew 4 percent to $3.5 billion; Consumer revenue was $3 billion, a drop of 12%.

Here is a breakdown by region: Asia-Pacific and Japan revenue was flat but China increased 9%. EMEA revenue was down 1% and Americas was down 7%. Revenue in the BRIC countries increased 4 percent.

Dell ended the quarter with $17.2 billion in cash and investments against a market capitalization rate of $26.5 billion. Shares closed up 0.7% at $15.08, but the stock is now down almost 8% at $13.75 in the after-hours session.

JON C. OGG

Filed under: Earnings, Earnings Warning, PC Companies, Technology Companies Tagged: featured

Full 360-Degree Dell Earnings Preview

Administrator — Tue, 22 May 2012 16:57:18 +0000

Dell Inc. (NASDAQ: DELL) is set to report earnings after the close, one day before rival Hewlett-Packard Co. (NYSE: HPQ) reports earnings. Dell is expected to report earnings of $0.46 EPS (down from $0.55 a year ago) on a 0.7% sales drop of $14.91 billion in revenue according to Thomson Reuters. For the coming quarter those estimates are $0.50 EPS and $15.42 billion in sales.

The most recent market stabilization and recovery could not have come sooner for Dell (and others). Shares ended April at about $16.50 and the stock hit $14.75 before recently recovering to the $15.07 price today. The 200-day moving average was cut through like butter on the downside over the last two weeks and there were four trading sessions that the 200-day moving average acted as a ceiling on. That level is $15.82 and the 50-day moving average is $16.25 as of today.

Analysts still see upside in Dell with the consensus price target of $19.30 representing about 29% upside to Monday’s closing price. Our big complaint is that Dell has so far refused to pay out a dividend. It has chosen to hold cash for a rainy day and to make acquisitions when possible. Dell also barely trades at 7-times its expected fiscal January-2013 year-end consensus targets from Thomson Reuters.

Options traders appear to be braced for a move of only about $0.60 or just over 4% in either direction based upon the speculative June 2012 put and call options prices.

The big question is no longer just PC sales. Dell has been moving into services and consulting for businesses on top of its enterprise sales. We will be looking forward to how Dell talks about the upcoming Windows 8 launch.

Whispernumber.com sent its whisper number to us today and noted that the whisper is also $0.46 just like the official target. It also noted:

Last quarter the company reported earnings in-line with the whisper number. Following that report the stock realized a 3.4% gain in five trading days.
In the comparable quarter last year, the company reported earnings nine cents ahead of the whisper number. Following that report the stock realized an 8.2% loss in five trading days.

JON C. OGG

Filed under: Earnings, PC Companies, Technology Companies Tagged: DELL, HPQ

Whose Earnings Will Be Worse? Dell vs. H-P (DELL, HPQ, AAPL, INTC, AMD, MSFT)

Administrator — Mon, 21 May 2012 16:58:51 +0000

This week is going to be an earnings bonanza for investors who care about makers of personal computers. While Apple Inc. (NASDAQ: AAPL) is all of the rage, we have Dell Inc. (NASDAQ: DELL) reporting earnings after the close of trading on Tuesday and Hewlett-Packard Co. (NYSE: HPQ) reporting after the close of trading on Wednesday.

There are several issues happening almost simultaneously here. Intel Corporation (NASDAQ: INTC) recently reiterated its guidance and this lends more thought to the PC recovery being sustained. Even Advanced Micro Devices (NYSE: AMD) signaled that it sees increased demand for PCs and its processors ahead. The reason is in part due to the Windows refresh cycle as Microsoft Corporation is now just a few months away from its launch of the Windows 8 operating system.

Our big question is simple, yet complicated: How bad will the reports be from Dell and H-P?

Hewlett-Packard Co. (NYSE: HPQ) is in a turnaround and Wall Street refuses to give it any valuation worth noting. Its value is about 6-times expected earnings. The chatter has already been telegraphed that some 25,000 or even 30,000 pink slips are going to be handed out at H-P. That will make its earnings coincide with National Employee Morale Day. H-P is a DJIA component and it is worth under $44 billion in market capitalization now that its stock is down more than half from the peak in early 2011. H-P still trades under $22 and its 52-week range is $21.28 to $37.70 against a consensus analyst price target objective of $29.23 that implies about 33% upside. Thomson Reuters has consensus estimates of $0.91 EPS and $29.92 billion in revenue for H-P.

Dell Inc. (NASDAQ: DELL) is dirt cheap for a tech stock and dirt cheap compared to the market, but against H-P it almost sounds expensive at 7.5-times its forward earnings. Dell is still just under $15 and its 52-week range is $13.29 to $18.36 against a consensus analyst price target objective of $19.43 that implies 30% upside. Thomson Reuters has consensus estimates of $0.46 EPS and $14.89 billion in revenue for Dell.

Analysts still seem to prefer Apple Inc. (NASDAQ: AAPL) over Dell and H-P alike if you just pay attention to the media coverage. What is interesting is that Apple has almost no attention given to its Mac sales at the moment. It is all about iPads, iPhones, and the coming Apple TV. Apple shares are finally recovering with a gain of 4% to $551.00 today. Analysts have a consensus target of $708.55 against the $551 price today. What is interesting is that Apple’s implied upside is about 28%.

Can it be that analysts actually prefer Dell and H-P over Apple as a group? That is what the math says on the surface. The difference is that many of the analysts following Apple are far higher and much more ambitious on Apple than the consensus.

JON C. OGG

Filed under: Calendar, Consumer Electronics, Earnings, Economy, PC Companies, Technology Companies Tagged: AAPL, AMD, DELL, HPQ, INTC, MSFT

Thousands and Thousands of H-P Layoffs Looming Ahead of Earnings

Administrator — Thu, 17 May 2012 19:04:44 +0000

Rumors have been out today that Hewlett-Packard Co. (NYSE: HPQ) is on the verge of a major round of layoffs. Some chatter has been as many as 25,000 or more pink slips to be handed out. The WSJ, Bloomberg, and others have reported this. Now CNBC’s David Faber has jumped in on a quasi-confirmation.

Faber notes that while the number of job cuts are not yet known, sources indicate that the turnaround of the company is going to include thousands of layoffs.

The question that has to be asked here is one of relevance. H-P is a DJIA component and it is worth under $44 billion in market capitalization since the stock is down more than half from the peak in early 2011. This company employed a whopping 349,600 employees as of October 31, 2011 per its annual report.

What is so sad here is that the market is completely discounting H-P. Literally, this stock trades at less than 6-times its expected earnings. The company was going to jettison its PC business, but the turnaround plan under Meg Whitman determination was that it would just cost too much to break the PC unit out of H-P.

The market either just does not believe that H-P can live up to its earnings through time or it has just reset what the company’s valuation really is. Under 6-times earnings is not expensive by any count as long as those earnings can be maintained. Rival (at least in PC sales) Dell Inc. (NASDAQ: DELL) now trades at only about 7.5-times its forward earnings.

H-P is already loaded up with enough debt of over $25 billion even if it does have a $19 billion cash and liquidity arsenal. Earnings are next week and the layoffs are expected to be announced sometime around that report. The current targets for the April-end quarter are $0.91 EPS and $29.9 billion in sales according to Thomson Reuters.

H-P is up three-cents at $22.06 and the 52-week trading range is $21.50 to $37.70.

Apparently the slogan on a tee-shirt is true, “The beatings will continue until morale improves.”

JON C. OGG

Filed under: Consumer Electronics, Corporate Governance, Labor & Unions, PC Companies, Rumors, Shareholder Issues, Software, Technology Companies Tagged: DELL, HPQ

Ho-Hum: iPhone to Get Larger Screen

Paul Ausick — Wed, 16 May 2012 11:25:19 +0000

The 3.5-inch screen on the iPhone from Apple Inc. (NASDAQ: AAPL) may be elegant, but it’s also puny compared with the 4.5-inch screens available from other smartphone makers. A report in The Wall Street Journal reports that Apple is revving up manufacturing for a revamped iPhone that will have a screen that measures “at least 4 inches diagonally.” The latest revision to the iPhone is rumored to be set for October or November, and that’s when the new and larger device will become available.

Samsung Electronics (OTC: SSNLF.PK) recently introduced a 4.8-inch screen on its Galaxy S III, half-an-inch larger than the 4.3-inch screen on the company’s existing Galaxy S II model. The new device is scheduled to launch in the US this summer.

The larger iPhone screens are being manufactured by several suppliers, including LG Display Co. Ltd. (NYSE: LPL), Sharp Corp. (OTC: SHCAY.PK), and Japan Display Inc.

Apple is reported to be considered making a smaller version of its iPad tablet as well. Like the iPhone, the tablet’s screen size has remained unchanged since the iPad’s introduction. Other tablets, including the Kindle Fire family from Amazon.com Inc. (NASDAQ: AMZN) and the Nook from Barnes & Noble Inc. (NYSE: BKS) have had success with smaller screens.

Apple and Samsung currently account for more than 50% of all smartphones sold, and Apple’s iPad really has no serious competition yet in the tablet market. The issue for Apple is whether or not it wants to get out in front of the mobile device market with a new product that raises the bar for everyone else. A “me-too” smartphone with a larger screen or a similar shrinking of the iPad screen is not the sort of change a leader makes. Especially when the evidence (i.e., sales) indicates that consumers can’t get enough of the products you already have.

Apple’s strength has always been to build a product that none of us knew we wanted because we don’t have the vision. Anybody can make screens bigger or smaller. Apple should be doing something else. Like building a cheaper phone that would appeal to the half of the world that can’t afford to buy the current iPhone.

Paul Ausick

Filed under: Consumer Electronics, Industry, PC Companies, Technology, Technology Companies, Telecom, Wireless Tagged: AAPL, AMZN, BKS, LPL, SHCAY, SSNLF

Even AMD Sees Better PC Demand

Administrator — Tue, 15 May 2012 14:30:39 +0000

What happens when even Advanced Micro Devices, Inc. (NYSE: AMD) predicts that the personal computer market is improving this year and also in 2013? Intel Corporation (NASDAQ: INTC) recently reiterated its same guidance last week as it did with earnings a month ago, and the hype is out there for Windows 8 from Microsoft Corporation (NASDAQ: MSFT) being the key growth driver.

What is interesting is that this is all taking place when Apple Inc. (NASDAQ: AAPL) has been a huge disruption force. Mac sales have grown, but the iPad has been the true disruption as consumers are flocking to the tablet for casual web use and media use and keeping older desktops and/or laptops to use for more heavy issues.

This morning at the J.P. Morgan Global Technology, Media and Telecom Conference came word from AMD’s CEO Rory Read that demand is picking up in the personal computer space. The pickup was said to be for both 2012 and for 2013, although that is a company prediction. He even went on to note that the personal computer market will have a single-digit rise this year and that the growth will be back-end loaded for the second half of this year.

The strength is based upon AMD’s Trinity processors for laptops after many key design wins. AMD shares are up only $0.04 at $6.79 against a 52-week trading range of $4.31 to $8.73 and its market capitalization rate is $4.76 billion.

Now the company just has to go out and execute on its strategy. Unfortunately, that has always been the hard part for AMD to maintain and that is regardless of the PC sales climate.

JON C. OGG

Filed under: Consumer Electronics, PC Companies, Software, Technology Companies Tagged: AAPL, AMD, INTC, MSFT

One Analyst Signals Caution and Cuts Estimates On Apple (AAPL, T, VZ, S)

Administrator — Fri, 11 May 2012 13:09:55 +0000

Apple Inc. (NASDAQ: AAPL) may have pulled back but this is still the darling of America. Most analysts have stepped all over themselves to raise their estimates and their price targets all the way up. So what about when a research call maintains and Outperform rating but cuts its estimates?

Credit Suisse did maintain an Outperform rating and kept its $750 price target, but the firm’s analyst effectively telegraphed that Apple is now vulnerable to slower U.S. smartphone growth and that is why the firm is lowering its estimates. The calendar year 2012 and 2013 are seeing earnings estimates cut by 3% and 5% to $49.34 EPS and $59.15 EPS, respectively.

We would note that these estimates are above consensus targets as the Thomson Reuters estimates are $47.01 EPS for 2012 and $53.88 EPS for 2013. The caveat is that those are September year-end targets. What is interesting is that Credit Suisse raised estimates and ratings on AT&T, Inc. (NYSE: T) and Verizon Communications, Inc. (NYSE: VZ) to Outperform. This report is also on the heels of a Sprint Nextel Corporation (NYSE: S) disclosure that it was cutting CEO Dan Hesse’s pay and incentive package to not include any gains from the iPhone for Sprint.

The note says, “While we see a weaker near term outlook given carrier pressures, with an ability to execute and innovate across the compute market, we believe that Apple will see robust bottom-line growth of 40%/20% in CY12/CY13, making the current valuation compelling.”

The underlying concern is that the leading US carriers may implement tougher smartphone upgrade policies or introduce extra costs. Credit Suisse said, ” we believe that it will have an impact on Apple with 38% of iPhone volume coming from NA and with the company having a dominant 43% market share in NA over the past six months. In addition, given the carriers’ changes in upgrade policies and a desire to save on costs, Apple is perhaps more susceptible than other vendors near term. We have erred on the side of caution and lowered our iPhone estimates for CQ212/CQ312 to 28.5mn/26.5mn but maintain our view around a strong ramp in CQ412 to 50.3mn. Given low smartphone penetration, carriers’ inability to ‘collude’ for a sustained period of time, and the roll out of LTE/4G technology, we believe that these pressures on iPhone volumes may be a short term phenomenon.”

Credit Suisse did note that Apple had 19% smartphone share in 2011 but it believes that Apple can expand its share to 21% in 2012 and 22% in 2013.

Apple shares are indicated down 1.35% at $562.80 and the 52-week range is $310.50 to $644.00.

JON C. OGG

Filed under: Analyst Calls, Consumer Electronics, PC Companies, Technology Companies Tagged: AAPL, featured, S, T, VZ