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  • chan_lei_ha chan_lei_ha Jan 18, 2013 4:23 AM Flag

    Very bad news for NTE - Sharp Nearly Halts all iPad Screen Production

    [TOKYO/SEOUL (Reuters) - Sharp Corp has nearly halted production of 9.7-inch screens for Apple Inc's iPad, two sources said, as demand shifts to its smaller iPad mini.

    Sharp's iPad screen production line at its Kameyama plant in central Japan has fallen to the minimal level to keep the line running this month after a gradual slowdown began at the end of 2012 as Apple manages its inventory, the industry sources with knowledge of Sharp's production plans told Reuters.]

    At first I thought the only bads news came from Japan Display since they reduce iPhone production 70%-80% where NTE make LCM for in Shenzhen. But now Sharp also nearly stop all production for iPad panels where NTE make LCM for in WuXi.

    I think Q1 of 2013 will now be very bad. Together revenue Sharp and Japan Display should make up 66%-75% revenue for NTE in Q4 of 2013. But with both production cut between 70% to 90% from the tow companies, this mean revenue in Q1 2013 can be down 50% to 66% when compare Q4 in 2014.

    Before think stock would bottom $6-$8 after earnings if guidance for Q1 very bad. But thought the stock is still good buy at that price range since future was still bright. However now stock may fall to $5-$6 range after all bad news. Now not so sure if NTE is good buy even at the low prices because they almost lost all the new business they just gain last year.

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    • I have to admit that this is in no way good news for NTE. My model coming out of last Q's earnings was for Q1 revenues to be flat with Q4 and now I will revise that down significantly. However, one quarter does not make the value of a company and I suspect Apple related orders will rebound in Q2.

      Ever since NTE announced it had reached $1B in revenues through November, and the stock price reached $16, we've seen nothing but an avalanche of bad news mostly directed at Apple.

      The dynamic that I see is that existing NTE shareholders know that Apple is a big driver of business and are quick to sell on bad news from Apple. At the same time, I do not believe the full benefit of being in the Apple supply chain is priced into the stock. You have to be a pretty close follower of NTE to know that it is a supplier of a supplier to Apple.

      Thankfully, we are about to start a couple of weeks of goods news. With the sky falling in all around Apple, I think its earnings release will probably show that the outlook isn't as negative as the market sentiment suggests. Then NTE's earnings will be record revenue and profit for Q4, which will likely attract new buyers to the stock which alone should create some buying momentum. Management will also hopefully announce the 3rd product will start or has started high volume production which will remind everyone that NTE's growth prospects for 2013 are quite good.

    • Incidentally, Sony's xperia Z tablet is coming out in Japan in around a week, and no doubt other countries soon after. Will Nam Tai be doing the LCMs for it? Who knows, but I wouldn't be surprised. It doesn't have to sell as many as the ipad to replace it in revenue, it just has to sell as many as Sharp's lost portion of the ipad -- LG Display was doing most of the displays for the ipad.

      Sentiment: Strong Buy

    • We already knew this. Even last quarter we were told that volume would be like 400k per month, and clearly first quarter would be lower than fourth.

      Fortunately, anyone would be happy to have IGZO from Sharp in any form factor Sharp makes it in, including for the next ipad or ipad mini. Also, there's a lot of non-Apple business which has been growing rapidly.

      Sentiment: Strong Buy

    • Yeah, I've heard a rumor that Apple is going to stop selling iPhones and iPads because there is simply no demand at all for them. They are sitting piled up in warehouses and will probably get buried in the desert because nobody wants them.

      NTE might go lower than $3 even. Surely NTE is not worth even the cash in the bank. Of course, it goes without saying that their machinery, inventory and land is all worthless too.

      NTE going to $6? Are you kidding? I can't see this under any reasonable circumstance.

      Sentiment: Strong Buy

      • 3 Replies to dtejd1997
      • Investors often overreact when it comes to bad earnings or guidance for high growth small cap stocks with low trade volume. I think it won't stay at $5-$6 for long but think it can reach that level.

        NTE stock was under $5 before all contracts with Japan Display and Sharp. Why you think it won't drop to $6 or $5 if it lost almost all business from new contracts?

      • Now come on. Everyone knows cash, hi-tech manufacturing facilities, equipment, inventories, highly skilled workforce, goodwill, and land have no value. Obviously, smart investors like chan_lei_ha wouldn't take those assets even if offered for free. In addition, don't forget that NTE doesn't have any debt, so that puts them in a very precarious situation. I'm going to refuse to cash my dividend check and return all the past dividends too, because I'm guessing that the wise chan_lei_ha would advise us that those are of no value as well. /sarc off

        Sentiment: Buy

      • With a 10% dividend, a p/e of 3,selling at 75% of book value, with over $3/sh in cash...

        Yeah, $6 looks like a reasonably safe entry point, but I'm going to build in a margin of error and wait until it hits $3/share

    • Tim Cook has confirmed the IPad Mini will launch in China by the end of January. Expectations are large and it would explain moving inventory and production to meet demand. Dont know what this means for NTE . Does Sharp have production lines for the mini at its other production sites?