| | | No one wants commodity flash controllers unless they're try to sell low cost mediocrity, and SIMO's business is not sustainable in the long run.
SIMO is guiding 2021 to more than $100 million above their previous record revenue year. It appears lots of companies want low cost commodity controllers. There are lots and lots of low cost electronics in this world. Lots!
I would not want to own a company reliant on just a handful of key customers.
Agreed. It’s nice that SIMO’s customer base is expanding so well. That should cause their multiple to expand.
No price wars when demand growth exceeds bit growth, which is the outlook for many years to come.
You appear to be forgetting that it is the price wars which drive the increased demand. Without price reductions in NAND, there is no demand growth. Fortunately, controller pricing has been stable for years, and doesn’t decline. That’s the benefit of supplying a product into a non-competitive market. There’s one big time flash controller merchant provider - SIMO - and no one to compete against on price.
Talk to any data center, and you'll get some surprising data regarding the ratio of SSD/HDD purchases.
The disk drive SSD story is well known by everyone. Each year some portion of the disk drive market is cannibalized by SSDs. That’s the story. SSDs are the future, disk drive is the legacy tech, and tape the old old legacy tech.
I should also mention that your analysis of this company is faulty, as you don't understand the structure of the joint venture, and the cash flows between WDC and the joint venture. Their true earnings are actually much higher than reported, as a good share of COGS is depreciation, and flows back to WDC from the joint venture.
That’s some nice talkitty talk, but in technology stocks what matters is revenue growth. WDC doesn’t have it, due to being the minnow is the cutthroat NAND flash market, subject to the whims of SK and Samsung. The depreciation benefit to cash flow is offset by the high capital expense of keeping up with the Kims. SIMO’s capital spending is design software, which is much less expensive than etching and lithography equipment.
SIMO is on its way toward $90 this year. WDC? I don’t know why anyone would buy it when it can’t grow revenues, and it has to build new $billion fabs every now and then. |
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