In a nutshell, it looks as though the desktop business (where the company sells surge protectors and BackUPS) will be a flat business at best going forward. Though the PC business is seeing unit growth of 13-15%, much of that is in laptops, which APCC cannot protect with its current product line. Moreover, even when people/corps upgrade PCs, they can use the same surge or UPS. So growth on the low end may not approximate PC growth. That is over half of APC's business, so it's a huge drag on sales growth.
Networking products (backup of servers and networking gear) like SmartUPS and Matrix should probably grow at 15-20%, in line with unit growth of that hardware. In the datacenter, APCC is seeing the big growth, with Silcon units up well over 100% y/y (but probably on a run rate to grow 75% next year). However, Symmetra is a slower growth product (less than 30%. And gross margins here are closer to 30% vs. the high 40's for APCC's traditional line. At some point, probably 2nd half 01, the growth rate will tick up again. But I'm not clear where margins will go (how far down) and what that means for earnings growth.
In the end, EPS should be 10-15% for the next two years. I would think that deserves twice the current multiple, which is WAY below the S&P right now. Still, this company no longer makes my hurdle for top line growth, so I will look to sell it on a decent rebound (high teens). I flirted with letting some shares go above 45 and my instincts are usually good. But I was too cute and paying for it dearly now. Very disappointing.
Turs |
