Archive for July, 2007
Consumer Tech Spending Visualization
Fantastic infoporn from Wired (the guys who really invented the genre). Note that tech spending is only 5% of total consumer spending, and cable, telco, and mobile spending account for 70% of that. It seems inevitable that the amount spent on these areas will fall, and the amount paid directly to content owners will rise. The pie may or may not grow, but the distribution will almost certainly change.
Quote of the Week
… Derivatives are a two-edged sword. Yes, they diversify risk and direct it away from the banking system into the eventual hands of unknown buyers, but they multiply leverage like the Andromeda strain. When interest rates go up, the Petri dish turns from a benign experiment in financial engineering to a destructive virus because the cost of that leverage ultimately reduces the price of assets.
Many companies in Networking/Communications survived the past years because they were sitting on tons of cheap money or had easy access to more cheap money. This could be ending.
Companies with healthy balance sheets will be better positioned for the coming endgame. I’m sure more than one company out there is staring wistfully at their FY2004 10-K balance sheet and wishes it hadn’t frittered away that equity.
The Andromeda Strain was a good movie and a good analogy in every way.
The Madness of the Carrier Chipset Market
There is an excellent editorial today by Lee Goldberg that explores the lack of new R&D in SONET/SDH and PDH chip sets. While I don’t agree with the conclusion it is a worthy topic of exploration and he highlights something missed by the mainstream tech media.
The networking industry may be about to hit a hidden speed bump as the number of semiconductor companies actively involved with developing products to support SONET/SDH, PDH, and other TDM-based technologies can now be counted on one hand.
Lee thinks this is a big problem. This is not a problem at all. It is the only logical solution to the madness of the past 6 years.
PMC-Sierra Q207 Conference Call Notes
Here’s a quick snapshot of the PMC-Sierra (PMCS) FQ207 conference call.
- Revenue up slightly based on the strength of storage and FTTH chips
- Headcount down from 1182 to 1057 with a corresponding reduction in opex.
- “Market Conditions Improving”, with Video being cited as the big driver I still would like to see someone somewhere step up to the plate and quantify this effect. Without data this is another “internet traffic doubling every 9 months” type of proclamation
PMC-Sierra Adjusts Channel Accounting
In a trend I expect to snowball, PMC-Sierra (PMCS) announced they will begin using sell-through accounting as opposed to sell-in accounting with distributors. This is a trend which traces it’s origins back to the accounting issues at Vitesse Semiconductor (VTSS.PK). (see “The Trickle Down Economics of Channel Stuffing“)
AMCC - Further Down the Spiral
AMCC (AMCC) held a conference call last Friday to review preliminary FQ108 results. The company indicated in April that FQ108 would be $60M down from $70M in the previous quarter (see “AMCC Kicks the Distribution Habit“). The final tally now puts it closer to $50M, a quarter over quarter decline of nearly 30%. This is worthy of detailed examination.
MRV, Luminent, and Fiberxon
MRV (MRVC) completed a merger with component maker Fiberxon without having audited financials and released an 8-K outlining events that do not point towards rapid resolution. In my personal opinion, the company has willingly placed itself in a situation where they face imminent delisting, violation of Bond covenants, and virtually certain attack from shareholder lawsuits and activists. It defies explanation.
Ciena and The Future of Carrier Ethernet
Ciena (CIEN) shares have been on a bit of a tear recently, rising 20% in June. Unfortunately we haven’t participated in this gain and I believe it is worth explaining the historical thinking behind this decision.
iPhone Pr0n
It was only hours after the Apple (AAPL) iPhone went on sale that the first device teardowns appeared. The shortest but most comprehensive can be found here.
