Your first two points have nothing to do with the fundamental business.
You focus on PC drives and forget about the other segments. B of A estimates STX capacity enterprise will grow at a 19% CAGR FY14-FY17 to 26.8 M units. Due to the higher ASPs and margins of capacity enterprise drives, the sale of one capacity enterprise drive provides the same contribution to gross margins as the sale of almost 5 client compute drives. IDC projects total combined desktop and mobile drive shipments to decline by 10% or 48 M units from 2014 thru 2016, while enterprise drive shipments are expected to grow by 20 M units during the same period, more than making up for the loss of desktop and mobile units on the gross profits.
For 1HFY15, WDC reported sales of $343 M versus $256 M in 1HFY14, up 34% YoY that's not peanuts.
"(even sub-500$ laptops now come mostly with SSDs - yes admittedly tiny ones)"
Q: Once that tiny amount of memory is consumed, where will the data be stored?
A: Most likely on a higher margin/ASP HDD located on the cloud.
The enterprise storage space is performance/reliability driven, rather than cost driven. So not having an internal supply of NAND flash is not as big a deal in this segment as it is in the desktop/mobile segments.
FYI a 512 GB SSD prices around $200, FOUR TIMES MORE than a 512 GB HDD.
Well it's back to PC paranoia as INTC and others cite soft sales. Throw in the strong $, about 24% of drives are sold in Europe, along with insider selling and the shorts have something to party about. Longer term, lower interest rates, and their expected positive effects in Europe, along with low oil prices are major positives. However, it's easier for the Analysts to bring down their numbers for oil firms and companies selling into Europe, rather than thinking about the BIG PICTURE!. Psssh, they just want to generate short term trades fo their firms. FYI BIG PICTURE thinking has never been a strong suit for the drive ANALYSTS as evidenced by 85% of them missing STX & WDC going to record highs in 2013 & 2014. Anyway, the hedge funds pay well for negative pieces, just ask B of A, GS, & JPM.
For the glass is half-filled crowd, storage demand continues to grow at 20% CAGR and SSD sales by STX & WDC are expected to grow at even a higher rate. FYI, WDC's 1HY15 SSD sales up 30% YoY. STX trails, but it is expected to roll out a SAS enterprise SSD later this year, which should help.
So those long term investors should use weakness next month as a buying opportunity.
As far as the market goes, it appears we are stuck in a trading range, 2030-2110 for the SP500. End of quarter window dressing and tax related money in-flows should support some upside this week. The pavlovian chart monkeys are looking for new clues to trigger their trades. The FED appears still to work, but outside of housing, any token rate rises are NOT a reason to sell stocks. DEFLATION, not INFLATION and sustaining the recovery remain #1 on the FED's agenda. I'll vote for September (50%) or later (30%), for the FED to move rather than June (20%).
However, soft durable goods orders and other recent macro indicators prevent the bull from roaring. If we can string together a few positive reports, we could see the SP500 knocking on 2150-85.
The son also rises, AGAIN!
It appears your insight about board censoring is on base. Just made a post which I removed due to typos and now I can't make the same post.
No surprise considering the skeletons in the boss's closet.
Since STX will likely report after these puts expire it's either a bet that STX will preannounce negatively, or as per the recent B of A put scam another I bank short shill will print a negative piece on the drive space which has been leaked.
Intel Corp. on Thursday cut its revenue outlook for the current quarter by nearly a billion dollars, saying it has seen weaker-than-expected demand for business desktop computers and lower inventory levels across its personal computer supply chain.
Furthering this topic, the concern here is that as unemployment shrinks it will create wage inflation. Historically, a 5.5% rate is considered the "full employment" threshold that triggers wage inflation. Wal Mart recently increased its base wages. However, an aging population, older workers typically get smaller raises than younger workers, coupled with the number of workers engaged in part time jobs may make the historical 5.5% trigger rate too high!
Even before oil prices dropped the inflation rate has been steadily falling, even as the economy expanded. In 2011 it was 3.0%, 2012 1.7%, 2013 1.5%, 2014 0.8%. The FED's target is 2.0%
More recently the rate has dropped from 2.0% last spring to a negative 0.1% in January, as the oil price decline started to kick in
In terms of the Consumer Price Index, CPI, prices of energy and food eaten at home, which together make up about 17 percent of the CPI, and housing contributes 26% of the CPI. Moreover, in the case of several components of the CPI, the government plays a major role in setting prices, so even if labor costs were an important part of production I would not expect them to affect prices directly. Among these components are utilities, public transportation, and medical care—services in which the government frequently either regulates prices or provides the services itself—and alcoholic beverages and tobacco, whose price movements often reflect shifts in federal taxation.
So even if wage inflation ticks up, it would have to tick up significantly to move tinflation beyond the FED's 2% target.
However, there is more tangible evidence to suggest a significant increase in rates would produce undesirable effects for the FED and our economy. Besides effecting the housing market, the dollar hit an 11 year high yesterday versus the Euro at $1.08 down from $1.28 one year ago. This hurts the earnings of U.S. firms doing significant business in Europe.
So view yesterday's action as nothing more than MCV.
Well we got another dose today of market manipulation by the algo boyz and girlz and their parasite heggies friends.
They used an upside jobs report as a cover/excuse to take the market down!!!!!!!!!!????????????
Well from the strong jobs report the fear mongers are now spreading concerns that the FED may raise rates in the June rather than the September quarter.
BFD, So what?
1. Any moron who has listened to Yellen knows she will do everything to sustain the recovery. That doesn't mean rates won't go up, they will, but it will be a token increase with the next round somewhat out there in deep space.
2. With Europe & China easing monetary policy, the FED doesn't want the $ to get any stronger.
3. With an aging population, low oil and soft commodity prices, DEFLATION not INFLATION is a bigger FED concern.
4. Obama nominated Yellen, and she doesn't want to #$%$-off the Democrats going into the 2016 elections.
So ignore most of the talking heads on CNBC and use the market action next week as an opportunity.
All hail MCV, MCV, MCV!!!!
Forgot to mention a key omission from the ML report:
Counter to STX expectations, ML sees STX gross margins declining by 50 bpts YoY in FY15.
Besides providing plenty of cut and paste from IDC and Trend Focus reports, here are the noteworthy points.
1, Despite seeing 2015 non-GAAP earnings growing 4% in 2015 to $5.56, he goes to sell???????
2. ML cites 2Q HDD TAM tracking below expectations
Old news, O'Malley indicated on Monday at Morgan Stanley that history has shown strong demand in March has overcome weak prior demand
3. ML cites higher relative exposure to PCs that face tougher comps in 2015.
The ratio of enterprise drives to client compute drives shipped last quarter was 0.25 for STX and 0.19 for WDC, which ML rates as a hold.
ML projects enterprise drive shipments will grow 5.9 M units YoY in 2016 to 79.7 M, while combined mobile and desktop shipments will drop by 13.5 M units to 446.4 M. Due to their higher margins & ASPs, the sale of ONE enterprise provides the same contribution to gross margins as the sale of almost FIVE desktop or laptop drives. So the impact on gross profit of the 2016 projected decline in client compute is more than offset by the projected growth in capacity enterprise units.
4. ML cites headwinds in client and enterprise drive sales from SSDs
STX will be ramping 3rd GEN SAS enterprise SSDs starting 2016 and expects growth in SSD sales.
All-in-all, iMHO a contrived love note for the shorts.
PS-Last week's purchase of 6,000 March 60 STX puts with the sale of 4200 yesterday will hopefully with raise eyebrows in Rockviile.
See post on STX board about the number of STX March $60 put options bought last week. Somebody illegally made a bundle front running the ML report
I am hearing that the favorite flavor of the funds has switched from old tech to growth tech. Give it month or so and the nervous nellies will be whining about valuations of growth tech and looking for bargains that return cash to the shareholders.
To further support my Spring Fling Rally thesis, here is what happened over the period six years along with a couple of my prior posts:
4/11/09-I posted-"since early March STX is up 114% and the market has made a 23% gain on the traditional spring fling rally"
FYI-SP500 went from 735 in early February, 2009 tom 919 by the end of April.
In 2010, market went up 8% between 2/1/10 and 3/31/10.
In 2011, market went up 7% between 3/11/11 and 4/24/11
In 2012, market went up 7% between 1/16/12 and 3/25/12
In 2013, market went up 10% between 2/3/13 and 5/12/13
2/8/14- I posted-"look for an extended rally fueled by liquidity coming from IRA tax contributions for 2013. Good economic news could take us into the low 1900s on the SP500"
By 5/23/14, SP500 hit 1900
Using the SP500 low of 1995 hit on 1/30/15, a 7% rally puts us around 2135 on the SP500 index
After a soft January filled with fears over oil prices, the strong dollar, and the Ukraine, February has the SP500 making record highs. The NASDAQ, the only major index that has not gone to all time highs, is within 2% of its all time high.
Well it's always interesting to read the press as the news hounds try to rationalize the market action. True oil prices have stabilized with the most encouraging signs being the bargain hunting in the group. Crazy Ivan has signed another "cease fire" in the Ukraine, but who knows how long that will last and there was some good economic news out of Germany late last week.
However, of equal, if not greater importance, are the seasonal factors that drive the market, which are overlooked by the press and many retail investors. At the beginning of the year, fund managers make changes to their portfolios, often lightening up on last year's winners, i.e. biotech & transportation, and replacing these investments with potential turnaround stories, oil stocks, housing, etc.
Another seasonal factor concerns money flow into the market. Starting in early February and going through early April, IRA contributions come into the funds. Many funds have limits on how much cash they can hold, so this money must be invested driving the spring fling rally. Over the past two years, the market has moved up 8% and 9% between early February and early April.
Finally, herd instinct about not missing a rally forces the nervous nellie fund managers to dive in, driving the market even higher. The chart monkies know this and play black in the casino.
So enjoy the weeks ahead, but remember all good things come to an end, i.e. early April. Starting next week the shills for the hedge funds will be out in force on CNBC and elsewhere warning about valuations and higher interest rates, IMHO neither of which are a real concern.
First reason, Micron is a U.S. firm and probably easier to deal with.
Could also be a statement about future pricing of 3D versus 2D NAND chips.
Micron is the leader in 16nm, planar flash, while Samsung & Intel are pushing 3D flash. However, it may be 2-3 years before prices for 3D NAND flash chips are lower than 2D planar flash.
Note prior comments about the length of time, 5 years it has taken 3D logic chips (FinFETs) to ramp, and thelogic manufacturers still have not gotten the yields down to match the price points of their customers. As a result, Logic Fabs are adding capacity for planar, 28nm logic chips, see ASML earning call comments about this. It is also believed that INTC reduced its 2015 margin guidance in part because yields for its FinFETs still are below plan.
So, it may be a while before 3D chips offer lower pricing than MU's 16nm planar flash chips. Thus if this is the case, STX would have an advantage sourcing 2D chips from Micron for its SAS SSDs, rather than employing higher priced 3D chips.
MU trails others on 3D flash, but leads on 20nm planar flash. Could be another indication of STX moving up the food chain into storage systems. What do you think?
My focus is on 3D flash. While INTC and Samsung have started or expect to ship 3D flash this year for evaluation, the question is when will $/chip provide a significant savings compared to current planar chips. Some believe not until 2017 or beyond.
After 5 years of development, 3D logic chip (FinFET) manufacturers still struggling with yields and cost. Some believe 16/14 nm FinFET ramp this year will be slower than expected, causing logic chip manufacturers to increase production of planar, 2D chips at the 28nm node
Industry flag ship, ASML indicated at their recent conference call surprising capacity adds for 28nm chips, which caused them to increase their 28nm wafer start forecast for 2015 by 13%.
Noted soft start to year due to headwinds from seasonal effects and weak Euro.
Current PC data indicate sales running down 5% YoY.
Expects back end loaded quarter.
Termed December pricing an anomaly, makes no sense for STX & WDC to go at it. Prices are up on selective drives. Lack of vertical integration and internal production limit what Toshiba can do in terms of gaining share via pricing.
Cited media fab capacity at 85% to 90%, will require capital investment which will plus margins up. WDC same story.
Cited SSD sales running around $100M/qtr, new SSD products should help.
Lowered December quarter drive TAM to 141 M units, matching WDC's estimate.