SGTL recap of recent events to keep in mind - this is an edited version of this morning's post:
From today, January 3, 2006:
09:57 SGTL SigmaTel tgt cut to $11 before the open at Wedbush (13.31 +0.31) -Update- briefing.com
finance.messages.yahoo.com
Q4 Preannouncement Possible as NAND Shortages and Likely Shuffle Loss Hit Orders; Lowering Estimates and Target to $11
· Q4 preannouncement by SigmaTel possible as NAND flash shortages negatively impact shipments. Channel checks indicate that NAND flash component shortages have negatively impacted SigmaTel’s Q4 chip shipments into the Apple Shuffle and other competing devices. This, along with our belief that Apple limited production of Shuffle in favor of Nano, raises the possibility that SigmaTel will lower its Q4 revenue guidance.
· Shuffle socket loss to PortalPlayer looks increasingly likely; lowering our 2006 estimates to $0.37, reflecting no Shuffle chip shipments. This business is worth $0.38 of EPS to SigmaTel in 2006, and we are lowering our 2006 and 2007 EPS estimates to reflect no Shuffle chip shipments.
· 2006 CES Forecast – SigmaTel might announce printer chip socket wins with HP, Dell, or other important OEMs, however we believe this is already reflected in our 2006 model. We expect SigmaTel could make some splashy product announcements at CES this week, with an Oasis printer socket win in Dell or HP printers a possibility. While this generates positive headlines for SigmaTel, we feel that we already reflect Oasis shipment growth in 2006 with $8 million of revenues in Q4’05 growing to $13 million in Q4’06.
· SigmaTel’s new 36xx MP3 decoder chip unlikely to materially improve financial outlook as product caters to non-Apple, high-end MP3 player market segment. Through no fault of its own, and largely owing to Apple’s dominance of the high-end of the MP3 player market, SigmaTel’s new STMP36xx product is unlikely to reverse the firm’s recent deterioration in financial performance. This chip was designed to address the high-end of the MP3 player market. Unfortunately for SigmaTel, Apple’s dominance of this market and its reliance on PortalPlayer suggests that there is little market opportunity for this chip in high-end devices. More likely, SigmaTel will sell these chips into mid-range MP3 player devices at lower-than-desired prices.
· Lowering Q4 and 2006 estimates, and price target from $13 to $11 in light of increased likelihood of Shuffle socket loss, and absent additional clarity on printer, video, or FM tuner revenues in 2006. We are now at the low end of SGTL’s Q4 revenue guidance range of $81-91 million, and have lowered 2006 estimates to account for lower Shuffle shipments. Our $11 target price is based on a 1x EV/S multiple of our 2005 sales estimate of $320 million, which we consider to be a trough valuation multiple for non-memory chip firms excluding brief periods of market capitulation. This multiple is a 20% discount to consumer chip peer Pixelworks (also EV/S) given our belief that the LCD TV chip market offers better secular growth opportunities.
Shuffle Socket Loss Hits SigmaTel’s 2006 EPS by $0.38, Driving Trough Valuations of 1x EV/S
Why Apple Likely Moved Away From SigmaTel Chips. Reasons that Apple may have moved away from SigmaTel may include: 1) Apple did not want to write new software code for SigmaTel’s new ARM-based MP3 decoder platform (the STMP36xx family), instead choosing to leverage its existing PortalPlayer ARM-based software code for the Shuffle, 2) Apple is seeking specific chip functionality (possibly wireless) for the Shuffle that PortalPlayer’s solution will offer that SigmaTel’s solution will not offer, or 3) Apple did not want to maintain Shuffle production using a nearly 2-year old chip design from SigmaTel (STMP35xx). We think that Apple is unlikely to buy chips from Chinese MP3 chip supplier Actions Semi (ACTS) because SigmaTel is seeking a U.S. exclusion order for Actions’ chips with the U.S. ITC for patent infringement. We believe a possible shipment stoppage is a risk Apple is unwilling to take.
From Post on 12/7/2005 8:55:41 AM
Message 21950895
05-Dec-05 07:39 ET In Play SigmaTel Q4 tracking well, but Apple may roll-out a new iPod Shiffle next year not using SGTL (SGTL) 15.57 : CIBC says its trip to Asia last week revealed several incremental data points impacting the MP3 market and, by extension, #1 MP3 IC supplier Sigmatel. On the positive side, demand and sell-through for MP3 players are running ahead of expectations. With one month left in the qtr, the firm thinks The co's Q4 is tracking well and that the firm's below-Street ests. for $82M and $0.12 could be conservative. However, the co's checks indicate that Apple (AAPL) is planning to introduce an updated version of its popular iPod Shuffle with a display next year. Checks suggest that Apple is unlikely to continue using SGTL silicon.
From Post on 12/7/2005 8:28:16 AM
Message 21950833
07-Dec-05 07:33 ET In Play Details of Sigmatel downgrade from Thomas Weisel (SGTL) 15.68 : Thomas Weisel downgrades SGTL to Peer Perform from Outperform, says that based on its checks, Q4 is likely tracking below expectations due to significant NAND flash shortages, which has resulted in weaker-than-expected demand among second and third-tier O.E.M.s; some O.E.Ms apparently are receiving only 50% of their flash orders. Firm also notes that competitive pressures are heating up, particularly at the low end of the market; adds that there is limited visibility on SGTL's 3600 product ramp. While the stock valuation already discounts a "healthy dose" of bad news, firm suggests shares will be range-bound due to its expectation of near-term downward estimate revisions coupled with greater uncertainty with the 3600/FM tuner ramp and the competitive concerns.
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From Post on 10/26/05
Message 21826552
17:39 SGTL SigmaTel confernce call summary (13.65 -0.82) -Update-
On conference call, SGTL says equipment issues at test and assembly partner affected qtr. Co is currently at 100% capacity, and expects to achieve buffer stock by mid-November. Expects to have another assembly and test provider in place soon. Says the production mix became more complex, and SGTL began building to customer orders. Says demand was strong in Sept, but lack of product availability affected revs. Experienced tightness in wafer supply. Says inventories were worked down to fulfill demand. Gross margin was 51% in Q4, and drop in margin from 55% represents a shift in products to lower end. SGTL will be filing an S-1 later this week related only to the offering of restricted shares affiliated with the Protocom acquisition. During Q&A, when asked to clarify Q4 guidance, co says it is seeing approx $5-6 mln in revs from acquisitions, with about 5-6 mln in spillover from Q3. When asked if that suggests about a flat core business, co responds by saying that is their current guidance, and they are still trying to deal with production issues. Says they are approx 1 mln parts short of what is in demand for Oct, hoping to be caught up by mid-November. Co's concern is with hanging on to the customer through the delays. When asked about selling stock at $20, CEO says 10b5-1 program was put in place earlier this year, and he set the low end at $20, thinking the stock would never get there. Says any prudent financial planner advocates diversification, and says he still has 900K in options. Says the 15K he sold should not be considered as changing his opinion or stake in the co, and that if he was dumping the stock, he would hope to be selling a "hell of a lot more than 15K shares." Simply says minimum price in 10b5-1 program is $20. Q&A is still going on.
See also this post: Message #142 from Rutgers at 12/29/2005 5:42:06 PM
Message 22013063 |
