Carl, you may be right regarding your analysis, but I have trouble agreeing with all you say. I assume you've gone to the TI website & have read the following:
ti.com
At the risk of sounding like a booster (I've no love for TXN or for any enterprise except the one I work for),
re. << Not a growth stock: Growth essentially ended in Carter era.
Not a value stock: PE 11 times growth rate. Only 10 cents of
assets per dollar. Too big to be a story stock: No matter how lucky they get, it
won't make much of a dint on their already huge sales.>>
If it is true that the DSP market looks to grow to 50b in the next few years; and if it is true that TI has 70% of the DSP programmers in the world, then 1. They do have a franchise, and 2. the market is large enough to make a significant difference in their growth; but with a cushion (for example, calculators). They could, of course, lose the franchise, be completely wrong in their analysis of the market, or....... If that were to occur, it would destroy the company, so I don't think they are being casual about this strategy.
Regarding the question of who is using TI DSPs today; and what the competition really is, it isn't a secret that 3COM is using them in modems, routers, hubs & so on. We also know that they are in a whole lot of cellular phones, too. (I've heard that Motorola - a DSP competitor also uses them but doesn't admit it).
In the specific channels that TI is targeting, it appears (IMO) that the most singular threat is from ASICs. For example, in the 56kb modem wars, 3COM elected to use the (more expensive?) DSP; while KFlex, I've been told, elected to use an ASIC. The key difference between the two was that a DSP is programmable and the ASIC's programming is a function of the circuitry. The outcome, of course, is that when the standards for 56kb modems are decided next year, if 3COM loses, software updates will be distributed to users. On the other hand if 3COM wins, all those KFlex modems will need hardware changes...... Now, assume that 3COM does win this battle. Is there anything architectural to stop them from replacing the TI DSP with an ASIC from - oh, VLSI? Nope. Would it happen? I don't know, but I would guess that TI would do everything possible to keep that business. So. For me, the questions were:
1. Does the DSP story make sense? Yes, it does.
2. Does it still make sense even if the market is overstated by 50%? Yes, I think so.
3. Is TI the enterprise to bet on if you wanted to bet on DSPs? I think so.
4. Does history have much to do with what TI is doing now? No, I don't think so.
5. Is a high PE bad? Not if what TI says is right.
I went kind of through the same evaluation a few years ago when IBM was in the tank. Didn't do anything then because I looked too much at their history. Still haven't done anything, because I mistrust them a little too much. Because of that, I've missed out of some fairly good gains. That said, I do think that if TI misses the earnings expectation this quarter, the market will punish the company badly. If it meets the numbers, it doesn't mean that the stock will go up. A lot of upside risk; but its a good shot.
So. I think TI is an opportunity, although I wish I had jumped when my kid told me to a year ago. I think there will be corrections along the way. I'm also looking at ASIC makers, because there is a story there, too. Thoughts there?
Lastly, Carl, I noticed in some of your prior posts on other threads that you seemed to actually disfavor Altera and Xilinx, although your negatives were from posts a year ago. Are you down on semis in general? Who would you go long with? |
