I think ODM (Original Design Manufacturer) Tinno Mobile, located in China, could be on its way, or perhaps already is, to becoming a significant Omnivision customer. From the Tinno website: "Tinno Mobile has established strategic partnership with many “Local Kings”(Top Local Brands) in more than 30 nations in South Asia, Southeast Asia, Latin America and Europe, etc."
Today I read that the same highly spec'd Tinno smartphone selling in India and Russia under the Micromax brand as the "Canvas Knight", is now selling in the Phillipines under the Phillipine Mobile Company as a model called "My Phone Infinity". While overall mobile penetration is high in the Phillipines, smartphone penetration was only 15% at the end of 2013, so the Phillipines is another tremendous, high growth opportunity like India, which only had 10% smarthphone penetration at the end of the year. Also, we previously heard that this same Tinno model is being marketed in Europe by a French company called Wiko, under the model name "Wiko Highway".
These phones, the Canvas Knight, My Phone Infinity and Wiko Highway, have both 16 mp and 8mp OVTI sensors in them, 2 ghz Mediatek Octa-core processors, 32 gb internal memory, 2 gb ram and 5" 1080p display. They appear to be very attractively priced.
EdChris said the Allview XI Xtreme Romania was a Romanian version of the Gionee Elife. I don't know whether or not Gionee has any relationship with Tinno. I might scout around another time. Good news is more OVTI 16 megapixels out there.
Too bad Yahoo doesn't allow edit. I mean "Wiko" highway, not "Wako" highway.
Maybe the "Allview" Romanian model that EdChris17 mentioned, which has the OVTI 16 mp, also buys from Tinno?
"Tinno Mobile has established strategic partnership with many “Local Kings”(Top Local Brands) in more than 30 nations in South Asia, Southeast Asia, Latin America and Europe, etc."
Yes, I forgot to include Gionee in the list of known OVTI customer relationships below.
Regarding rebranding, there appears to be a debate online as to who rebranded who, or whether there was any rebranding at all. The most plausible sounding explanation I have found for the reason the Wako Highway and Canvas Knight are/look the same is that both companies purchased the design from Tinno, who is an ODM (original design manufacturer) with headquarters in Shenzhen, Guangdong, China. Tinno designs and makes smartphone models and then shows them to top brands in countries around the world. If they strike a deal, a local brand like Micromax in India will then market the smartphone under its own name. Tinno has R&D centers in Hong Kong as well as mainland China. Further complicating this matter however, is that Tinno may actually own Wiko, but Wiko is nonetheless an independently operated company with headquarters in France.
I have probably done just enough reading about this matter to get the info wrong. LOL. But one salient point, as you stated in your post, is that OVTI sensors are getting out there in more and more brands. We know that OVTI's 16 mp sensor is now out there in at least in Gionee, Micromax and Wiko brands.
Another very important point is that this Tinno sounds like a great OVTI customer with a great deal of potential to be significant driver of OVTI revenues (if not already) going forward.
From the Tinno website: "Tinno Mobile has established strategic partnership with many “Local Kings”(Top Local Brands) in more than 30 nations in South Asia, Southeast Asia, Latin America and Europe, etc."
Yes, OVTI is a killer buyout candidate imo. OVTI is selling at a 3.32 ttm PE ex (cash +cash equivalent+ WLCSP value) of nearly $10/share. Meanwhile, some mid cap chip companies, like SWKS for example (which I also own), have pretty highly valued shares right now that they could use to scoop up an undervalued small cap chip company like this to get bigger.
OVTI also comes with a very nice set of customer relationships in the smartphone business: Apple --- though Duke says that is diminishing, Huaweii, Lenovo through Motorola, LG through LG Innotek, ZTE, HTC and India's #2 player --- Micromax, just to name a few that we know about. Then there is the automotive, security and wearable business. And Google with Project Tango.
Edit: I meant to say that dual sensors on the rear of phones is likely a coming trend for "flagship" phones. I can't see it becoming a trend for the average smartphone for the masses any time soon, considering it adds costs to phones to provide capabilities that most people probably don't care about.
I wonder if OVTI is in any LG branded smartphones? LG Innotek is a subsidiary of LG, as is LG Electronics, who makes the LG smartphones. Their flagship phone sold here in the USA, the LG G2, has a Sony Exmor sensor in it for the rear facing camera.
The LG smartphone business had a very good 2013, with worldwide unit shipments increasing by 81% over 2012 to 47.7 million units, putting them in fourth place worldwide for smartphone OEM shipments according to IDC. They were number five for the 4th quarter of 2013, shipping 13.9 mill units, which represented a 53.2% YOY increase. Source: IDC.
LG is releasing a flagship 5.9 inch phablet, the LG G Pro later this month I believe --- targeting Samsung Galaxy Note III. We ought to keep an eye on LG's new releases to see whether any of them get OVTI sensors.
Lenovo was #5 in worldwide smartphone shipments for cy 2013 and #4 for the fourth quarter. Source: IDC. Lenovo recently acquired Motorola whom OVTI was supplying sensors. I am not sure who was/is supplying the sensors to most of the Lenovo phones. It would be worth trying to find out how big a presence OVTI has with Lenovo and whether it is expanding.
HTC is releasing a new flagship One branded smartphone in a couple of weeks that is rumuored to have two camera sensors on the back, leading a likely coming trend of multiple sensors on the rear of phones. ST Microelectronics provided the rear sensor on the 2013 HTC One and I believe OVTI the smaller front facing sensor. HTC is another company worth watching to see whether OVTI can gain the rear sensor(s), though HTC has badly stumbled in worldwide market share.
Duke, thanks. The OVTI diversification story is proceeding very nicely.
On another note, I just noticed that analysts have the exact same minus 36.5% YOY eps growth prediction for FY '15 for both OVTI and CRUS. Crus is much more dependent on Apple than OVTI, having received 82% of their revenues from Apple over the last year. CRUS, like OVTI only gives guidance for one quarter at a time. Sometimes I wonder if on these small cap techs whether these sell side analysts just pull forward estimates beyond one quarter out of their #$%$ for various manipulative purposes. Clearly in OVTI's case, there is a big contradiction between three analysts raising price targets to $25, $22 and $21 following the earnings call and nobody lowering price targets, but somebody dramatically lowering FY '15 earnings estimates.
In CRUS's case, (which I don't own), there is also a big contradiction between the long term, modest growth expectations for Apple and the rapidly declining expectations for CRUS in FY 15, who is very tied to Apple. CRUS has said their relationship with their "number one" customer remains very strong and they expect to maintain gross margins in the mid forties. If that is so, why is their business going to take a huge hit in FY '15?
In both cases, I would like to hear a public explanation. If they are pricing in losing multiple slots in both cases to get FY 15 estimates, they should say so and lay out the evidence. When we get far off lowering of estimates on small caps like this with no explanations, I tend to think they may have more to do with intended price manipulation than fundamentals.
Finally, I'd say OVTI is better risk/reward than CRUS precisely because it so much better diversified as you pointed out in your post, and it could weather a potential hit to its Apple business much better than Crus could.
According to Gartner market research, India was the world's fastest growing smartphone market in Q4 2013, growing at 166.8%. Google "Gartner India world's fastest growing smartphone market" to see mid February report.
Also, Forbes India put out a story in November, 2013, titled "Can Micromax Become India's Leading Smartphone Maker (seller)?" speculating whether Micromax can surpass number one Samsung in India. The reporter doesn't really arrive at a definitive conclusion, but notes that passing number one Samsung in India is clearly the goal of Micromax co founder Rahul Sharma.
Duke, Thanks for your analysis. My initial gut reaction is that an early release of the iPhone 6 is not likely, the digitimes rumuor notwithstanding. There are many other rumuors suggesting that Apple will incorporate very significant new technology and changes in to the iPhone 6 over the iPhone 5S, potentially making the iPhone 6 lean more towards the "revolutionary" side of the scale versus "modest updgrade" side of the scale. Imo, it will take at least the entire, usual cycle, with a fall release, to turn the iPhone 6 in to something more "revolutionary" than "modest upgrade", and to get all the new technology working seamlessly. Moreover, Samsung has given Apple a bit of a reprieve considering that the Samsung Galaxy S5 to be released next month has extremely modest upgrades over the Galaxy S4. So if a fall release for the iPhone 6 is the case, then it seems unlikely that Apple would already be taking supplier shipments for the iPhone 6 --- echoing Bernard's sentiments, though I am not really familiar with how far ahead these Apple suppliers usually ship. JMHO.
The best price I found for the iPhone 4 in India (yes, the now four year old iPhone), which Apple recently relaunched in India, was 18,792 rupees --- only about 1,000 rupees less than the new Micromax. The iPhone 4 has OVTI sensors front and back, but it is the old OVTI 5 mp rear facing sensor and a vga quality front facing camera. The iPhone 4 also has the now smallish 3.5 inch screen. Seems like the old iPhone 4 would have a hard time competing against the Micromax Canvas Knight and the Gionee Elife E7, but it was a reliable, well put together phone and purchasing one is the least inexpensive way to buy Apple brand cachet.
The Canvas Knight A350 is being offered on the Micromax website for 20,000 rupees. Check it out. I nosed around for the lowest price for some competitors in India and found the Galaxy S4 with Qualcomm Snapdragon 600 processor and 16gb onboard at 29,800 rupees (this is a heavily discounted price ahead of next month's Galaxy S5 release) and the Gionee Elife E7 with Snapdragon 800 processor and 16gb onboard at 23,870 rupees. Imo, the specs on the Canvas Knight are competitive with these other flagships, but beats them on price, especially Samsung's price. With Micromax already being the second largest smartphone player in India behind Samsung, with their smartphone market share at 16 to 21% depending on who you read, and the company being a home grown Indian based company, I think this phone has a good chance to do well there. It is already getting some good reviews on the tech review sites in India with a little bit of nationalistic pride thrown in for good measure.
I am getting excited about this Micromax customer. There was a story in the WSJ yesterday quoting market research firm IDC saying that they figure there will be much more "robust growth in smartphone demand" in India the next few years than China. Less than 10% of India's total mobile users have smartphones compared to 40% of China's mobile users already having smartphones. IDC says India is "largely untapped market" whereas China is starting to look like a maturing market (in IDC's opinion).
The combination of specs and price on Micromax's new flagship phone with the OVTI sensors, the "Canvas Knight A350" is quite impressive. Its powered by Mediatek Octa-core that clocks in 2 GHz.. (Note: I am a Qualcomm fan and personally wouldn't take a Mediatek Octa-core over a Qualcomm Snapdragon 800 quad core clocked at 2.2 ghz, but most consumers will assume that 8 cores is better than 4 cores and these will sell imo. The phone also has 2 gb ram along with 32 GB internal built in storage; no room for expansion, but with everything headed to the cloud, I think 32 on board GB is fine. Users will be able to control the camera with their voice and it sports a new generation M8 Largan lens. It seems like it might be a bit of an upgrade to the Gionee Elife E7, which also sports 16 and 8 mp OVTI sensors, but I am not certain. The screen is 5 inch, full HD 1920 * 1080 resolution, with pixel count all the way up to 443 ppi. The phone has One potential drawback could conceivably be the 2350 mAh battery which is a bit smaller than some other flagships. Reviews of how well this phone works in people's hands should be coming out shortly.
Thanks for sharing your analysis Duke! Glad to hear you are in! I may have some comments later. Gotta go grab lunch now.
Good find. Micromax is a great new customer! According to articles I have just read, Micromax has the second biggest smartphone share in India at roughly 16 to 21% behind Samsung's roughly 34%. Moreover, Micromax is the largest, domestic (Indian based) smarthphone manufacturer with a big lead on the other domestic manufacturers. According to IDC, smarthphone unit sales in India grew threefold in 2013 over 2012 and is set for continuing strong growth in 2014.
We can all point to positives and negatives about this company and its price, but there seem to be a lot more positives than negatives. Ok, I am done blabbing out OVTI for awhile. Gonna go seek relief with one of my big caps with lower beta for awhile.
The price target raises from Needham, JPM and Northland following the earnings call to $25, $22 and $21 from $20, $18 and $15 respectively doesn't mean much? The five year, annual compound 20% growth rate forecast from analysts doesn't mean much? The $7 in cash and s/t investments on the balance sheet don't mean much? The unrealized, $3.11 per share pre-tax EPS gain sitting out there on WLCSP doesn't mean much? The double digit, sustainable growth in Asia mobile, automotive and security doesn't mean much?
Just sayin' that we can all easily point to positives and negatives.
Edit: In paragraph two, I am referring to analysts lousy forecast for FY '15, not the excellent 5 year forecast.
As I mentioned below, the same analysts also are forecasting a 20% compound, annual EPS growth rate over the next five years. If that were true, the company would earn $5.23 in FY '20, and be selling for at least 20 times ttm EPS, or $104 per share, more than a quintuple from here.
I don't put much credence in the analysts' long term, forward estimates for OVTI. OVTI only forecasts out one quarter. Beyond that it is really heavy guesswork. Currently some analysts are either pricing in unsubstantiated rumuors about Sony displacing OVTI at Apple or they are trying to manipulate the price down to get in at lower prices because they missed the WLCSP story. Heck, as of today, there is another unrealized, pre tax, eps gain sitting in WLCSP of $3.11 per share. ($209 mill less 34.1 mill on books)/56.2 mill shares). Analysts earlier forecast for FY '14 were off (too low) by a huge margin and I expect their EPS forecast for FY 15 to be way too low as well.
That being said, I sold 32% of my holdings at an excellent price in AH after the earnings announcement because it ran so far so fast (seemingly a good move on OVTI by me for a change), but I will likely hold the rest long term and add some more long term, bull call spreads if it happens to drift back down towards the 50 DMA. This balance sheet is incredibly strong and the company is well positioned in segments set for steady, sustainable, strong growth: mobile in emerging markets --- China, India etcetera, automotive and security. There is also potential for an activist investor to get involved with this company and look to force OVTI to return cash to shareholders through buybacks or dividends, and finally, this company with its strong balance sheet and strong China relationships, is an attractive buyout candidate for a mid tier chip company interested in leveraging its relationships in Asia. JMO.
By the way, the same analysts that have #$%$ earnings estimates for FY 15, also have earnings growing at a very healthy 20% compound rate over the next 5 years. (See analyst estimates tab here at Yahoo). Go figure.