Target also change to now $28. Separately, Transcend latest revenue reports show almost all the growth from its SSD products, and we all know that those latest models have the SIMO SATA-3 controller inside.
It looks the pieces are coming together nicely. As I projected in the last few weeks, it seems customer adoption of SIMO's SATA-3 controller is moving faster than expected. Although I am not sure whether it is for technical or commercial reasons (or both), this is the best outcome that I would hope for because this business can be valued a lot higher than the LTE business. If SIMO becomes a major SSD controller player, that business alone would have a $500MM range valuation.
I would not be surprised that SIMO guides 50%-100% higher on SATA-3 over prior guidance. I think this is the reason that SIMO is getting multiple upgrades. What do you think?
I do not think there will be any MA news, and I am not sure there will even be a huge Q2 revenue spike. On the other hand, I think the adoption of the SSD controller has been pretty amazing, and mobile phone memory has been very strong. The wild card to me is not their LTE, but their SSD controller version for automation. At the end, I think their Q3-Q4 will be great, and the year for SIMO will still be 2015, not 2014.
So will there be selling to lower this to the $18 range in the next 2-3 weeks?
It should have a $300MM+ revenue opportunity by 2015, and with its margin level and growth rate should generate the multiples that translate to mid $20's.
Memory makers are all up because demand looks very health and supply will be tight. Since SIMO is practically part of the supply chain of all the nand producers (Samsung, SK Hynix, Sandisk and Micron), SIMO is at a better spot than it used to be when it was at its peak a few years ago (where SIMO was more connected to module makers). SIMO will raise guidance in Q2 and Q3 with mid term annual revenue at low $300MM and its fair market value of $25-$28/share.
They licensed Mobiveil's UNEX(TM) NVM Express Controller kit to help them to develop PCIE controllers quicker. The key is that SIMO is in the process of becoming a major SSD controller player, and that I think we make SIMO a target to be acquired.
I will add, that SIMO seems to be on track, and the current share prices will look to be really cheap a year from now (like a 50% discount). Anyone care to also project?
I agree with Geezer on this "hopefully not":
This announcement makes Micron nand available for this controller, but the nand can be used by PC OEM and module makers. If you search enough, you will find that more and more memory module makers are using this controller, with the latest being PNY and ADATA. ADATA is using this to go up to 1TB! SIMO guided earlier that their OEM deal enters production in 2H/14 (or 4Q), the Christmas shopping season. That works out well with the launch of 5th generation intel processor which also have lower power consumption. So the PC OEM deal seems to be for the next gen longer battery life ultrabooks. So SIMO seems to start with acceptance at the high-end market. This would be great.
I also hope this is not part of the PC OEM because if SIMO is at high volume production right now it is likely that it will meet the revenue target without the PC OEM - they will have to raise guidance.
I agree with you to focus more on SSD drivers instead of LTE because the ASP for this is $10 so profit per unit is X more than LTE. It looks like SIMO aims squarely at Sandforce, and one would wonder why AVGO sold it to Seagate in the first place: are they worried that Sandforce is behind the curve? Does anyone also see the news that SIMO has licensed the technology to speed up is PCIE controller development? Becoming a major player in SSD controller will at least double the market cap of this company.
There are rumors of Samsung baseband in S5 Prime for Korea and I do think they will have multiple wins. I think they will have higher volume in 2015 when S5 becomes a 2nd year model. In any case, SSD controller still have higher potential because it is open for multiple customers instead of one. I think your SSD controller projection looks logical.
This is actually old news. Digitime reported Sandisk releasing eMMC controller POs to SIMO back in March. At that time, I pointed out that this would be for the more price sensitive value market in China, but since this is new business for Sandisk, it would be difficult to project volumes. SIMO did what was expected. It did not include any revenue projection in Q1 release. It is very good that Sandisk is confirming now from the buyer side.
One just need to look at how many new low-price tablet models are coming out in China to see the potential of this. Most of the people there cannot afford iPad yet, why major market pushes by Apple in China, including contract fianlly with China Mobile have not generate major upside surprises. On the other hand, low price market growth is going crazy. If one look at even Toshiba is coming out cheap tablet for US market, one will see that this can spread beyond the China market. SIMO never focuses on cutting edge, but always on high volume commodity type. This will work out great in the next 1-3 years as high-end tablet and phone market growth stagnate and low-end market catches up.
What is more positive is the SSD controller. the number of memory vendors using SM2246EN grow by the week. One of the latest is from PNY, which is solid player. I think SIMO is going to hit the jackpot with SM2246 in 2-3 quarters, and when it releases its PCIE controller in early 2015. It will become a major threat to Marvel and LSI. Fun will start then.
I agree with you that it is good price point to enter. Volume is not high so it is not institutions dumping because they know bad news coming, so I wonder why people are selling. As we speak, there are reports of Samsung software code revealing the upcoming S5 Prime with Samsung's Shannon 300 baseband being tested. That baseband has SIMO's transceiver. This stock may have a 10-15% downside risk before Q2 earnings, but it is mitigated by an expected June announcement of S5 Prime (and subsequent SIMO design win). But by Q2 earnings, it is likely to have a 25%+ upside potential. Again why selling and try to time the market?
You are right he is a pretty good short-term forecaster, why I was hoping he is right that SIMO goes to $15. But I am afraid that there are not a lot traders in this stock and dumping dries up too quickly...
I agree with you on one thing - this could go down to $15 in the next couple of weeks. I hope you are right because I want to accumulate at that level. So please get that one right.
I do not think you have worked in the industry and understand how new products get tested, verified, designed into new production, and eventually come out as finished products. These guys are forecasted when sales will ramp up which means that the trains have left the station in terms of whether their controllers will be used for new models that consumers will see in coming quarters. Their projeted timing all make sense, and the "risk" of not getting the POs are not really there.
You also do not understand that increasing opex, especially to head-count, is a great early sign of business picking up. These guys do not really hire until they have overtimed every of their existing employee to death. These guys are also pre-announcing cash bonus for 2014. Do you know why? They are telling their employees to stay put because they know how much they will make. They cannot loss any employee now. That is why they are telling them in April!
If you ask any analyst, they will pay zero attention to card and USB controller sales. To them, that is just good to have. For tech investing, they will not put a "buy" if SIMO has 3xPE, but only card business.
If you read my notes a couple before earnings annoucement, you can see that I projected what they were going to say. So that is my track record. Do you want to compare notes at 3Q conference call to see who get it right?
SSD controller: Several module makers using it, including Transcend ($2bn annual revenue). Transcend CEO projected in 3/14 SSD as one of the strong growth drivers of the company. But SIMO seems to think the design win from the PC OEM, as well as its own design win from a nand producer (no supply shortage there) more significant. So even given these two later wins starting in Q3 and Q4, how can this be only $10-$15MM for 2014?
LTE: S5 was sold out in Korea right now, and doing better than S4 launch in 2013 or current iphone sales. Version with Exynos processer will use SIMO's transceiver to enter production in April. Apple is learnings from last year's mistake and rumored to have 2 new phones to launch earlier than last year. Samsung knows this and also learned from its 2013 mistakes (no counter in fall) and will launch new versions of S5 prime and derivatives to counter (higher screen resolution and Exynos processor). The design wins there is almost certain (no technical issue anymore) and will be for 2014 Christmas sales. How can this be only $10-$15MM? Additionally, those models will carry over into 2015 so it will be the 2-year deal again with 2015 revenue almost in the bag.
eMMC for TLC: the hottest market in China is the sub 1000RMB smartphone market, and I will bet the nand maker is targeting that market. China is projected to sell 450-500 million smartphones in 2014 and I think sub 1000 category will be the largest one. Given it will be only 4-5 months of meaningful sales, as guided by SIMO, it should still be pretty good. But SIMO is not counting a penny here. I would also point out it is unbelievable how fast those Chinese smartphone makers come up with new models.
Put all 3 together, I think SIMO under estimated by $20-$40MM. What do you think?
They were hoping a quick 10-15% but this conference call did not give them that. On the other hand, the guidance looks very conservative which will allow SIMO to exceed meaningfully by Q3 the latest. These same people will jump in when Samsung announces new phones by June (and subsequently SIMO announces new LTE design wins). After that, finished products with SSD controllers in them for Christmas shopping will hit the market.
I think growth will be realized. The critical question is: when will analyst upgrade it? Last time, they did it before LTE sales went wild. How about this time?
I think LTE will be stronger than you expected because additional model wins are coming. I think Samsung will create as much diversion as possible to the expected iPhone-6 launch in Q3 by launching its own "new" products, based on its own CPU and baseband. Wallace will not steal the thunder of his own client so he is not going to say anything, but if you watch what Samsung has been doing...
Look at my prediction this morning, I am pretty much on target on how they will forecast - not to raise guidance much. They did this but gave a very good story on their eMMC wins, SATA-3 wins, etc. As I said before, Q2 will be the real judgement day, but looking at what they say today, it will be really stupid for people to sell - do you agree?
Asia Today just reported that Samsung will release its S5 Prime in June with Exynos 5430 as processor. Samsung uses SIMO transceiver when it uses its own CPU, but Samsung just responded to the report by saying that the company is not going to comment on rumors and speculations. SIMO annouced its 2014 LTE win right after Samsung launched S5. This is why I do not think SIMO will annouce any win this quarter.
1. I do not think they will announce any additional LTE win this quarter because Samsung has not announced any new flagship model that would use SIMO's transceiver. Samsung's mid-low level phones tend to use Broadcom's solution. But there has been reports that S5 has been selling better than S4 so the current win should be better than SIMO projected last quarter, but I do not expect SIMO to raise guidance - they would rather exceeds by Q2.
2. I agree that order quantity from 3rd eMMC customer is big question mark, and one would expect SIMO to say something about it. That is incremental revenue.
3. SATA-III controller would be another question mark - how solutions by PC OEM are being accepted by PC brands?
4. I do not think Ferri products are large volume sellers since in the past that segement has been small and steady - but does that represent some new applications, markets, etc.?
Overall, I think SIMO will probably raise guidance a little, but not as high as day-dreamers would wish. But for me, it would be big mistake to sell and I will look for soft spots to add because I still believe Q2 conference will be the key point.