So I guess Samsung actually decided to use SIMO transceivers and the smart money was wrong. Option is always risky, especially when the players do not understand the competitive landscape of the underlying business. It would be better if there were more speculators like you which would make a bigger pop today, but I guess it would be OK for many of the real investors here that SIMO does get the business.
In the past hour, low prices were accompanied by low volumes - looks to me that small day traders trying to lock in the $0.5 gain he or she made the last few days. It's funny how prices can be driven by these little guys but it is sad truth for a small cap stock like SIMO.
This article did not point out the real reason:
Last year, Samsung baseband did not have carrier aggregation so it was not accpeted by many carriers. QCOM would not sell its latest baseband at its initial launch. Instead, QCOM sold it together with the processor. QCOM only sold the baseband separately a few months after its launch. This was not an issue for Apple, because iphone launch is in 3Q, but it prohibited Samsung from using its processor on S4 for most of the year. Smart strategy on the part of QCOM. SIMO 2013 transceiver business had no new order. It was 2012 programs (probably on S3 variations). When Samsung introduced its Exynos S4 in Korea in late 2013, it used QCOM and Intel basebands.
But this year Samsung has a baseband that is supposely being accpeted by carriers now. So in theory Exynos can go to many more markets this year. This time, Samsung has the decision right, so it will be interesting to see how Samsung wants to play.
Samsung tomorrow did show a version of S5 with Exynos, but did not state which Exynos model. In any case, it will not come out on April 11, but will be at a later date. Samsung deleted the posting later so it appears that they did not want to announce right now, but some employee pasted the wrong version.
I actually was hoping that when the news get out that SIMO is not in the first S5, the stock will take a dive to $13-$14 level so that I can buy a little more. I am a little disappoint be cause it does not look like institutional investors are in major selling mode so I guess they do know better (they should since they usually have broad understanding of the chip industry competitive landscape).
But we may have still have some quiet days with low volume to push the stock down for buying opportunities before end of April...
The quick answer is "I do not think so". The longer answer is "but that is not a surprise". The reason is simple: There will be multiple variations of S5, and yesterday we saw the first one. Samsung will be using its own processor, possibly Exynos Xifinity, for some of the variations and markets, and Snapdragon for others. The S5 from yesterday apparently had a Snapdragon in it. This is why Kou said in Q1 conference that he expect transceiver order in Q2.
Samsung has to come out with a 64 bit chip next, but you may know that Android is not 64-bit yet (but will be soon). So Samsung will have to launch different "S5" during 2014. 64-bit is inevitably because Intel have long been producing 64 bit chips, and Apple is 64 bit currently. Android has to catch up and major forces (such as Samsung and QCOM) need to compete against Windows and Intel. This is why I think Samsung's continued commitment to its own processer (Exynos) is crucial to SIMO's transceiver business.
Excellent - we have two approaches right now: Trying to understand revenue growth by understanding buseinss strategy, products and competitions, or follow the "smart money"
Hope we will be able to see who is right pretty soon. Since you mentioned timing, I will step out by predicting that by end of April (given no macro-economic meltdown), SIMO will be in low $20's...
It is very interesting that people are selling SIMO at this price level. On the other hand, the latest news that might be relevant to SIMO is the latest teaser from Samsung of Exynos chips coming to MWC next week. Why is that news relevant?
If Samsung uses its own CPU in its smartphones or tablets, it is more likely that it will use its own baseband because QCOM does not sell its latest baseband separately until several months after pairing with its latest CPU. And of course a Samsung baseband has a SIMO transceiver in it.
An annoucement of a new Exynos does not mean the Galaxy S5 will use it (we may know by Monday), but Samsung will use this chip for other Samsung phones and tablets. To me, the xynos teaser demonstrates Samsung's continued commitment to produce its own CPU, a strategy that is crucial to the survival of SIMO's transceiver business.
So there you have it: investors are selling SIMO, but the latest product rumor seems to point to brighter 2014. Which should you believe is the right bet going into 2014 MWC next week?
I did not sell, did you?
Even after the dissect you will not be able to tell because Kou said Samsung will label it. The key is not even a Samsung band, but a Samsung processor because that determines whether it uses a Samsung base band which will have a Simo transceiver. All the rumors are pointing out to S5 having more than one specs so even initial dissect will not tell "win" or "loss".
Why is this important to SIMO? Because QCOM Snapdragon 805 is not coming until mid year, and everyone is expecting S5 to have Samsung Exynos processor which means Samsung baseband with SIMO transceiver!
This explains why SIMO jumped this morning. Someone got this news before it was published in late afternoon.
Many posted on their thoughts for 2014 design wins and guidance revisions. Here are my thoughts:
1. LTE design win in March, after Samsung launches the Galaxy S5 (no more than $15mm).
2. End Q1 - initial guidance for 3rd nand customer ($10-20MM) and SATA-3 controller ($5-10MM)
3. End Q2 - more LTE wins (up to $20MM+), 3rd nand customer up to $15-$25MM, chance to raise SATA-3.
4. End Q3 - significant earnings over expectation, 2014 revenue revised to slightly over $300MM
Agree, and am holding as well. Just look at today, a market down day, over 400K share already and simo only down
1. Min. of 25% eMMC controller revenue growth of $120mm = $150mm.
2. eMMC controller revenue from 3rd customer = $25mm - $30mm
3. Flat removable memory controller (old business) = $100mm
4. SATA-3 controller = $15 - $30mm
5. Transceiver = $15 - $40mm
So total revenue $305 - $350mm, at 49% gross margin = $150 - $170mm operating income, minus $70mm opex, results to $80mm - $100mm operating income. After 18% tax, you get $66mm - $82mm earnings.
This will result to 30% annual growth, with clear horizon until 2016-2017 that is strongly supported by mobile computing. This can easily lead to a valuation of 12X earnings (which would be very cheap for a business that grows in the 30% range). Most money managers know how conservative this company is, and they were practically laughing hear at the conference call because the management was so obviously sandbagging.
But this means 40% - 73% upside within 6 months at today's closing price, or share price target of $24 - $30. Expect continued buy before it hits $22 a share.
What are your thoughts?
Everyone who has tracked what QCOM and others know where Samsung is on processor and therefore where SIMO is on transceiver. Everyone who has tracked how Apple has been falling because of lack of exposure in low cost smartphones know the potential of lower cost TLC memory and SIMO controller will do in markets like China and India. Wallace is super clear that he is about unit, not name recognition, and you are about the only one who does not get it.
Good luck keep shorting this.
Because Samsung does not want anyone to know yet what will be in S5. That is a Samsung thunder. SIMO dares not to steal it.
I do not with your assessment on "the bad" because:
1. Their main market is Asia but with holidays coming up in China, Taiwan and Korea, at least 20 days are being wiped out from the quarter.
2. Everyone knows that they cannot annouce transceiver design win because Samsung has not anounced S5 yet, and everyone knows that SIMO's transceiver goes with Exynos 6 processor to be used in S5. Samsung does not even use its own processor for lower-end models because someone else is willing to sell them at loss (Broadcom).
3. They just signed the deal with the OEM supplier on SATA controller and it takes at least a few months for the end users to use and pay for the SSD drivers that has the component. And their customers are in China so no one will be taking deliveries at least until mid Feb. SIMO will be luck to fork in one month sale of SATA drivers in Q1.
I think they will give out more realistic numbers at Q1 conference call in April for the full year. I think a lot of analysts are expecting the same.