Investment

» lcha - Year three

I renewed my subscription to Kirk's newsletter for a third year now. My reasons are many but first and foremost, I am making more money from the timeliness of Kirk's tech stock picks than the cost of the newsletter. Kirk understands the tech scene much better than an oil guy like me so for the tech portion of my portfolio I am deferring to Kirk's judgment, saving myself lots of research time and making a profit. That's the bottom line.

Also, I applaud the transparency of Kirk's newsletter. Nothing hidden. Nothing washed over. All newsletters should be so open and forthcoming.

And another big reason I re-subscribed to Kirk's newsletter is as a show of support for his investment website at Suite101. There is so much good information I glean from the website from so many knowledgeable posters on so many topics that that alone is worth the price of admission. It takes a lot of time to set up and moderate a site like this and I want to see it continue. The discussions here are among the most civil I encounter anywhere on the web. Civil discussions on the web are not to be taken for granted as most of you know.

Thanks for the efforts Kirk!

Thanks VERY much!!!
Kirk

-- posted by lcha

» Normxxx - Kirk: SOFTWARE PROBLEM

On the new site (this one) the 'update flag' for a new posting is not getting set, so after I visit a thread it shows as permanently "visited." This seems to occur on all browsers.

-- posted by Normxxx

» SteveT - SanDisk's New Problem

By BILL ALPERT

THE SURPRISE DEAL THAT Micron Technology made to acquire Lexar Media can't be a very good thing for flash-memory favorite SanDisk.

Lexar has trailed SanDisk in U.S. retail sales of those little cards that store digital photos, music and computer files on flash chips -- the fine, fine semiconductor chips that are "non-volatile," meaning they retain your data when the power's off. The deal will give a retail product line to memory-chip maker Micron (ticker: MU), along with some patents and an interesting trade-secrets lawsuit in which Lexar (LEXR) won a $465 million judgment against Toshiba and which Toshiba is appealing. After Wednesday's news of the merger, SanDisk (SNDK) shares slipped about 6% by Friday's close to $53.06.

Micron will exchange 0.5625 of its shares for each one of Lexar -- a price worth $8.43 per Lexar share, or $688 million for the company, which was about a 20% premium when the deal was struck. Some investors seem to think a higher counter-bid will appear: Lexar stock ended the week at $8.60 -- a higher price than Micron's deal is worth. Such a hope is probably vain, because Lexar reportedly sought other interested buyers before shaking hands with Micron. Micron stock ended the week at 14.47, trimming the deal's exchange value to Lexar shareholders to $8.14 per Lexar share.

SanDisk was the best performing big semiconductor stock last year, when it tripled on surging demand and limited supply of flash. What's changed lately is the prospect of increased supply from a new flash-manufacturing venture between Micron and Intel (INTC). The venture's modest production in Boise, Idaho, will be supplemented in the second half of this year by a Virginia factory and then a third factory in Utah in early 2007. The latter two factories will make flash chips at low cost by forming lots of them on big 300 millimeter-wide wafers.

Demand for flash will continue to grow, of course, as digital music players like the iPod nano store more and more songs on flash chips instead of disk drives. Lexar Vice President Eric Whitaker says that chips from the Micron-Intel joint venture will reduce Lexar's chip costs and supply plenty of chips to fill demand from new flash markets. After digital music, the big opportunity for flash will be in multimedia cellphones, which use flash chips to store music and video. Another incipient flash market will be computers: A new design promoted by Microsoft (MSFT) and Intel would use some flash memory to achieve a quicker boot-up than today's models.

With SanDisk shares trading around 53, investors are valuing the company at about 22 times the First Call consensus forecast for 2006 of about $2.40 a share in earnings. But that earnings estimate ignores the cost of employee stock options -- as so many tech stock forecasts still do. Accounting rules now require option expensing, even though tech stock issuers still seem to hope that investors won't care. With option expense, SanDisk's 2006 EPS could come in around $2.07, according to RW Baird analyst Tristan Gerra. That would make SanDisk's '06 earnings multiple more like 26 times.

SanDisk has always enjoyed terrific profit margins, in comparison with other companies in the memory business like Micron. Much of the difference owes to patent royalties that SanDisk gets from other flash makers like Samsung. In calendar 2005, SanDisk had a gross margin of 35.5% on its products, while Micron's was only about 20% as Micron slugged it out in the commodity market for DRAMs, or dynamic-random access memories. That differential makes me think that Micron could sell its flash products at prices that improve Micron corporate margins but undercut SanDisk's prices...and profit margins.

NOW THAT INTEL AND MICRON are making flash chips together, flash memory assumed new prominence at Intel's spring gathering for computer designers, which it hosted in San Francisco last week. Intel presentations rejoiced at the thousand-fold improvement in flash chips, over the course of the last 20 years.

The company modestly extolled the wisdom of buying flash from Intel, instead of from "Vendor A," "Vendors B," or "Vendor C," because of Intel's expertise in designing electronic systems and its generous marketing dollars. It's my guess that those Brand X vendors are: Samsung Electronics; the joint venture of SanDisk and Toshiba; and Hynix, in the order of their share of the $18 billion flash market...but what do I know? Comparing itself to Samsung, Intel bragged about its expertise in the high-density circuits known as "multi-level cell." Intel bragged of its low-cost factories and generous capital investment, compared to SanDisk/Toshiba. The only thing Hynix had going for it -- according to Intel -- was the low cost of Hynix chips.

My readers think long term, so I also took interest in Intel's views on which technology will succeed flash chips as non-volatile memories. Other firms have bet on technologies with names like "MRAM" and "FeRAM," but Intel's money is on "phase change memory." Indeed, it's invested in a PCM joint venture called Ovonyx, along with Micron's former chief technology officer and Energy Conversion Devices (ENER). Flash technology still has several generations of improvement ahead of it, says Intel, but by 2010 PCM technology might be ready for non-volatile memories that are faster, longer lasting and more capacious than flash.

While most of Intel's presentations gloried in computers that would apply teraflops of processing power to terabytes of data (all the world's films contain about 420,000 terabytes, or trillions of data chunks), my attention was caught by a little discussion on how Intel's processors will allow a PC to act as the command hub for home robotic devices, like vacuum cleaners. Such appliances can't cost-justify much computing power, but a central PC with Intel's new multicore processors could control a house full of inexpensive robot helpers -- sort of the way that HAL 9000 ran the spaceship in 2001: A Space Odyssey. That worked out well, if my own rather volatile memory serves.

E-mail: william.alpert@barrons.com

URL for this article:
http://online.barrons.com/article/SB1142...

-- posted by SteveT

» Normxxx - re: Kirk: SOFTWARE PROBLEM

In response to re: Kirk: SOFTWARE PROBLEM posted by Kirk:

There are a number of site maintenance programs that permit limited use of HTML (see http://traders-talk.com/mb2/index.php?).

-- posted by Normxxx

» Normxxx - Wikipedia provides their site maintenance S/W free

... and it allows all HTML (except things likely to get people into trouble, and automatically closes open modes at all logical points and at the end of messages.) They must be doing something right; they are the preferred encyclopedia on Google.

P.S. Are you aware that http://www.swalert.com/ is pushing stock on Suite101.com?

-- posted by Normxxx

» Normxxx - Longer Thread Titles?

How does one qualify to be allowed thread titles that do not cut one off at the knees? I never wrote headlines for the NY Daily News!?!

-- posted by Normxxx

» Jas_Jain - CACS?

Hello Kirk,

Are they still in business, or got acquired, or what?

Just curious,

Jas

-- posted by Jas_Jain

» GetMo - Not getting comfortable for me

This Iran thing makes me nervous. I for one think that the current administration will take out those nuke sites before he leaves office, and I think it will be sooner rather than later. ( I am sitting on oil stock positions as we speak) Exogenous events do tend to effect the market. Then you have the common seasonality of the market, "Sell in May and go away...." The last thing I would mention is inflation....I know the official number has not been that bad but what I have noticed is most of my utility prices have been creeping up quickly, not to mention the 1$ food items disappearing from the dollar menues at my local fast food shops.

-- posted by GetMo

» allancoleman - Not getting comfortable for me

In response to Not getting comfortable for me posted by GetMo:

this Iran thing makes the world nervous . even the UN , that tended to ignore Iraq , seems to care about this Arab nation . i don't think we'll have to worry about using our own resources to deal with Iran . just assist Israel protect their own nation's interests . this is , afterall , a crusade . no different than the world has faced in centuries past .

oil securites , as are most nations , are always effected by exogenous events . there are more of us , ever larger growing other nations , to share a smaller resource .

" Sell in May and go away ....." usually works , but following that strategy caused me to miss a key rally last summer .

inflation is a ' sometime thing ' , depending on which $1 food items at your local fast food shop you might feel are a priority in your life style . your best security is always your ability to do without .

godspeed in your struggle to ' GetMo ' .

-- posted by allancoleman

» Jas_Jain - Not getting comfortable for me

In response to Not getting comfortable for me posted by allancoleman:

--

" even the UN , that tended to ignore Iraq , seems to care about this Arab nation."

And how long has Iran been an "Arab nation?" If you knew your history, Iran is an Aryan nation (the largest Aryan migration that took many to India (the present-day Pakistan), went thru Iran and a large group settled in Iran.

Americans have never been good at history and geography. No? That is why Americans are in for the shock of their national-life -- collapse of the current econo-political system within the next 30 years. Of course, it would begin with the Greater Depression within this decade. Bad things just don't happen to other countries. Given time they happen to all countries and now it is America's time.

Jas

-- posted by Jas_Jain