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InvenSense, Inc. Message Board

  • gary_lee27 gary_lee27 Mar 2, 2013 2:08 AM Flag

    Apple design win NOT priced in ... here's why ... please read

    Let me first state the Apple contract design win is NOT priced in at the current level. Late January (after earnings) the stock popped. Tons of chatter regarding INVN great earnings, great this, great that. Let me set you straight, the earnings wasn't THAT great. There was worry regarding the CEO being forced out ... nobody really knew why and there was much concern and speculation throughout calendar Q4 and into calendar Q1. Any CEO being suddenly forced out is usually a red flag and the earnings simply put those fears to rest as there were no red flags in the earnings. Also, Nintendo is one of their premiere customers but their *go-to-new-product* WII U is a freaking complete disaster ... that alone could of brought INVN to it's knees, however the future growth of INVN is in the mobile space ... and they have the who's who list of clients ... specifically the who's who client product in the Samsung Galaxy S3. As long as INVN is in the Google Nexus 4's, Amazon Kindle Fire HD's and specifically the Samsung Galaxy S3, nobody trading real money really gives a damn about Nintendo and their fate. But most importantly ... the *potential* Apple contract win ... so in short, the run up happened because - 1)CEO issue resolved & gave the green light to buy 2)Samsung, specifically Samsung S3 growth and 3)potential Apple contract. Everything else in that earnings was non material and nothing to write home about.

    Remember, it's not a fact that INVN has a design win from Apple, many are speculating and there was much talk regarding the iWatch ... so on Feb. 12 when Tim Cook spoke to the media at the Goldman Sachs Conference (i think it was Goldman?!) INVN sky rocketed on the craziest volume due to speculation that INVN had something to do with the iWatch. Instead, nothing was mentioned regarding the iWatch and as soon as he was done talking ... within minutes INVN reversed coursed and started its nose dive.

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    • Some posters are asking about the specifics reasons to believe INVN has won the Apple contract. Here's what we know:

      "The Company initially won the product design specs for the iPhone; however, the Company did not have the capacity or financial resources to support the volumes that Apple required."

      Then, we had rumors that did not pan out:
      "There's even talk that InvenSense's chips could make an appearance in Apple's iPad mini"

      10/12 Earnings Call: "in general we are in discussions with every major customers in multiple different applications" .... in response to question regarding Microsoft

      10/12 Earnings Call: "Once we have a specific design win awarded clearly it would be a big deal to this company and material and we would be able to talk to it. We cannot provide anything further other than the stated goal which we have said many times. We seek and believe that we will serve all customers in the smartphone and tablet market." response to question regarding Apple

      1/9/13 IBD Interview with INVN CEO: "Abdi declined to comment on Sunnyvale, California-based InvenSense's relationship with Apple, but he said he expects to provide sensor chips to all top tier phonemakers this year."

      2/14/13: IBD Article "They have most large phone and tablet companies except for Apple," said Gus Richard, senior research analyst at Piper Jaffray. "And I would note that a large new customer has requested that they double the capacity. They are increasing their internal test capacity quite substantially. So it's one thing to ask a potential vendor to be ready to increase output significantly. It's quite another to go out and spend capital and buy and build test systems to be ready for that volume."

      2/27/13 Mobile World Congress: "After attending an InvenSense (INVN) analyst event, Piper expects the company to begin obtaining revenue from Apple (AAPL) and gain share at Samsung (SSNLF) and in China. The firm maintains a $27 price target and Overweight rating on InvenSense."

      Sentiment: Strong Buy

    • what is your source for Apple win?

    • Great insights and analysis Gary. Looking at the volume of INVN compared to the dates of Tim Cook speaking and it is clear that is what happened. It is also clear that INVN investors need to be aware of when Tim Cook is speaking in the future. You are right about the influence of institutional traders as well.

      May I add that I'd like to see people on here let everyone know when news of a Teardown comes out. I didn't see anybody on here note that we were in the Blackberry Z10 when that news came out in a blog. That news didn't get posted on INVN's twitter page until about 8 days later. The day it came on the blog was the big volume day and one of our few up days of late. Teardown news is critical. It could certainly be an Apple product teardown that outs INVN rather than a Tim Cook speech. I don't believe we know whether we are in other high profile products yet either like Google Glass.

      Sentiment: Strong Buy

    • Thanks for great posts gary_lee27. I agree the new CEO is doing a good job but how sure are you the CEO departure isn't because of STMicio patent infringement, and Nasiri literally copied patents, and how ugly it could get. otherwise this company could grow 30-40 percent for at least a few years.

      • 2 Replies to rashtchi
      • Rashtchi, thank you for your reply. Your question "how sure are you the CEO departure isn't because of STMicro patent Infringement and" etc etc. Great question by the way!!! Answer - I cannot be 100% certain that the CEO departure isn't because of STM patent infringement. And quite frankly, unless you're top level exec management for INVN, there's really no way to be 100% certain. There's certainly risk here with the patent infringement lawsuit, however there's risk with buying any stock at any given time. If you dig deep enough into 10k annual statements of most any tech company, you'll see similar situations with patent infringement lawsuits frequently. By excluding companies with pending lawsuits, you'd be left with a short list of companies to invest in. From my experience, lawsuits like these get dragged out over the course of a year or more likely years. The potential Apple win is not 2014 or 2015, it's most likely already signed or at very least 2013 time frame. So you'll have decide if the reward from an INVN investment is worth the risk of a potential lawsuit loss. I can't do that for you. What's most likely the case with Nasiri being ousted was because he was a great engineer, not a great manager of a publicly traded company ... this is quite common with tech companies. Either way, the point I was trying to make regarding the fear of CEO's sudden departure is this ... He got the boot, there's no explanation, it's a red flag, something will get released in the earnings, nothing came out, we're good to pull the trigger for now. That's pretty much it.

      • Type message

    • continued - (sorry for the typos and grammar) - so by looking at the timing ... specifically number of shares traded and price/action of stock before Tim Cook announcement of potential iWatch on feb 12 ... and number of shares traded and price/action of stock after Tim Cook announcement of total garbage ... one can assume that the Apple design win was beginning to get priced in early feb. 12 and quickly got priced out by afternoon feb 12. So with the huge volume sell off since then, you can certainly assume that the Apple contract is priced OUT.

      Baird has nothing to do with this sell off. #1 No big money follows Baird recommendations and #2 their call was after the initial sell off ... they just simply jumped to an obvious call.

      INVN is getting sold off cause of the #1) Feb 12 event mentioned above, #2) recent semiconductors company suspect earnings guidance, #3) Short-term or professional momentum traders dumping - shorting based off #1 and #2 explanations. None of this has anything to do with INVN's forward growth or expectations. I'll just say it, pay attention ... INVN won the Apple contract, Gross Margins for Q1 is just so so but Q2 will be significantly better because of the TWO contract manufacturers and the Google Nexus 4 sales is better than you think. Somebody tell that Baird chop shop that good research and good calls come with hard work ... not lazy calls ...

      • 4 Replies to gary_lee27
      • Gary, very thoughtful post. I completely agree with your thesis. Supplying AAPL started to price in and then quickly priced out. If it is announced INVN will probably jump a few dollars almost immediately. I do not see much downside from here and will continue to hold my shares (not trade them).

      • Hi Gary thanks for this. I disagree on the AAPL design win or at least I don't think it will kick in this calendar year. I think the more obvious win is in the PS4 dualshock4 controller which features an unknown 6 axis sensor. I believe this for two reasons 1. that is the new higher margin sensor that INVN was hoping to roll clients into. 2. the ramp up of production for PS4 matches the timing of when INVN says they will start to see margin benefits from a higher adoption of their 6 axis sensor. I'd love to be wrong about aapl though! But, I don't think you should value the stock based on that.

        Sentiment: Buy

      • continued - Part 2 ... when there's no news on a stock and it tanks like INVN, always check the general markets condition or health. While the general market may be in some correction, INVN was getting rocked while the market had some sizable up days ... it was moving inversely and independently of the general markets ... so the general markets DID NOT take INVN down with it. The big reason why stocks get sold off when the market goes into a correction is because many fund managers have to raise a certain amount of cash and reduce everything in their portfolio by a percentage. That's why you see good stocks get punished for reasons beyond their control. I'm just saying ... useful information for some of you with your other stocks.

      • Thanks for that!

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