THE GILDER FRIDAY LETTER - 09-29-06
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gilder.com | Issue 266.0/September 29, 2006
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HEADLINES:
- The Week / Synaptics: Too Much Linearity
- Friday Feature / Metcalfe: How Online Video Will Change The World
- Friday Blogger Bonus / Multiple Must-reads
- Readings /
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Gilder/Forbes TELECOSM 2006
October 4 - 6 | The Resort at Squaw Creek | Lake Tahoe
Just FIVE DAYS until Telecosm 2006 begins …
Prepare for an intense three-day examination of the ascending technologies with the potential to disrupt our lives, business decisions, and investment portfolios.
Scheduled debates on Net “neutrality,” patent reform, regulation, the end of medicine,
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politics of science and economics promise to be just a few of the highlights.
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The Week / Synaptics: Too Much Linearity
Charlie Burger, Senior GTR Technology Analyst (09/12/06): Dominating the PC touchpad market, Synaptics is a primarily analog company with roots reaching back twenty years when Carver Mead showed the way to create analog systems that scaled like digital systems in accord with Moore’s law. The company made little progress until the mid-1990s when, as a result of ingenious mixed-signal inventions by Mead student Tim Allen, a breakthrough came in the realm of touch.
So superior were the company’s touchpads that they quickly took over the industry. Unlike rivals Logitech (LOGI) and Alps, Allen used a capacitive sensing pad rather than a resistive pad to identify the placement of the finger. A patented analog converter can locate the capacitance aroused by the finger on the pad to an accuracy of around 25 microns, or a quarter of the width of a human hair. Synaptics’s superior pads came down in price to the point that rival Logitech exited the business, and the company’s touchpads now go into more than half of the world’s laptops.
Fresh in many investors’ minds is the “Apple Affair.” Almost two years ago, Apple (AAPL) propelled Synaptics forward with its famous iPod scroll wheel, only to reverse course six months later, replacing Synaptics touchpads on some lines of notebooks and iPods. As a result, Synaptics’s fiscal year 2006 (ending in June) sales slid 11% from the prior year, earnings fell to $0.85 per diluted share from $1.23, and Wall Street sliced the company’s market cap in half.
Discounting the Apple spike of 2005, Synaptics’s sales have been climbing linearly since 2003, a sign of decelerating momentum. Though laptops have been gaining share in the global PC market, rising to a third of shipments last year from just under a quarter in 2000, the concurrent ascent of touchpad shipments has been too weak to sustain Synaptics’s forward speed. To rejuvenate the company, management has been organizing an invasion of the huge markets for teleputer sensors and imagers.
The relentless march of digital media into home entertainment and portables plays into Synaptics’s strengths. Synaptics’s touchpads are perhaps even more advantageous in small mobile devices than in the conventional PC market where they have been so successful. The technology is just 0.15 millimeters thick compared to one to several millimeters for competitive solutions. Key to touch-sensitive LCD screen applications, Synaptics arrays are also more transparent, transferring 98% of the light to the user.
Synaptics hopes to put its capacitive touch interfaces wherever you might find buttons, switches, or LCD screens. By combining navigation and multimedia on the touchpad itself, Synaptics is already enhancing digital media devices by enabling users to look at movies or listen to music without turning their computers on. Now shipping in Korea are cell phones with interfaces that display both navigation and quick launch buttons that provide easy access to applications such as music and messaging. Possible new markets beckon in desktops and peripherals including keyboards and monitor controls….
But barring another Apple-type deal, is Synaptics still a worthwhile investment?
Excerpted from the September issue of the Gilder Technology Report. To read the complete Synaptics (SYNA) company update, as well as updates on Ikanos (IKAN) and Essex (KEYW), see www.Gildertech.com.
Capturing impressive long-term gains, Gilder’s tech portfolio is up 285% since the market low in October 2002, compared to 99% for the NASDAQ and just 69% for the S&P 500.
Year-to-date returns for Gilder’s “Telecosm Technologies” companies continue to impress. Equinix is up 46%; Finisar is up 58%; EZchip is up 89%; and Broadwing up 102%!
(Based on performance data analyzed and reported on, on the completely independent www.gtindex.com.)
Subscribe Today: gildertech.com
Friday Feature / Bob Metcalfe: How Online Video Will Change The World
Video Link, (09/27/06): When Bob Metcalfe talks about the future of the Internet, people take note. He invented Ethernet, the international standard for local-area networking. Technology Review caught up with Metcalfe last night at the opening reception for the Emerging Technologies Conference. He told us why he thinks Internet video could have a positive environmental impact by reducing the need to "press the flesh."
View Video: technologyreview.com
RELATED READING
Metcalfe Vouches for Video
lightreading.com
The Gildertech Blog, blog.gildertech.com | Logon now to see what’s new.
Friday Blogger Bonus / Multiple Must-reads
Paul Kedrosky, “Wired Has Its Mojo Back” (09/27/06): The current issue of Wired is very good, the first issue in ages of the once-hot-hotmagazine to contain multiple must-read articles.
Highlights:
- An otherworldly and cautionary piece on the Gizmondo meltdown
- George Gilder on compute clouds and the limits of computational parallelism
- A look at the backstory on eBaumsworld
Check Out Paul’s Blog: paul.kedrosky.com
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The Information Factories (On newstands now in Wired magazine. Available online Oct. 9.): The desktop is dead. Welcome to the Internet cloud, where massive facilities across the globe will store all the data you'll ever use. George Gilder on the dawning of the petabyte age.
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Readings /
Telecosmic Time Travel
blog.gildertech.com
10th Annual Gilder / Forbes Telecosm Conference
home.businesswire.com
Stock Spam Hits Cellphones
forbes.com
Disclosing Security
forbes.com
Stop tiptoeing around TV's future
theage.com.au
Fed Ease In 2007?
ftportfolios.com
Economic Expansion And the Angry Bears
article.nationalreview.com
Deanonomics Is Pure Deanogoguery
article.nationalreview.com
A Pebble’s Ripple Effect
tcsdaily.com
Amazon: Servers For Hire
technologyreview.com
Just Announced Foveon Sensors Featured In New Sigmas
popphoto.com
Intel Develops Tera-Scale Research Chips
kurzweilai.net
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FRIDAY LETTER STAFF
Editor: Mary Collins / mcollins@gilder.com
Research: Sandy Fleischmann / sfleischmann@gilder.com
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