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Oops. I guess I was too slow on the uptake.
>> The heat sink that was on the [Banias] CPU was small, and it had a fan that was not running. The reason was because the fan was built to sense the heat coming from the chip, and it only turned on if it needed to. <<
wbmw: isn’t the very existence of a fan in the demo hardware convincing evidence that INTC’s designers thought the heat sink might not be sufficient?
WSH: I can give you a partial, albeit unsatisfactory, answer. The 4Q02 QoQ guidance for INTC and AMD is based in part on seasonal patterns. Worldwide, Q4 is a stronger period for PC’s (and semis in general) than Q3.
However, in Japan, China, and the rest of Asia, the peak season for PC sales is summer. Because the large majority of TMTA’s sales are still in Asia, TMTA does not experience a seasonal spurt going from Q3 to Q4.
In spite of the above, I still consider the Q4 guidance to be a serious disappointment. Regards, Dew
>> Have you considered redoing your previous quarter by quarter earnings analysis, given TMTA's new numbers, just to prove that they can return to profitability? <<
I don’t fully accept the notion set forth in the CC that the lack of revenue growth in 3Q02 and 4Q02 can be made up by a steeper-than-previously-expected ramp in the second half of 2003.
In all likelihood, the slow period TMTA is going through now will mean one of two things (or a combination thereof): 1. Later achievement of profitability; or 2. Less cash in the bank at end 2003.
I one thing I do not think TMTA would consider is a highly-dilutive stock offering. As MoldyEgg and others have pointed out, there are other ways to raise capital such as credit lines and high-yield bonds. Thanks to TMTA’s lowered cash burn (excluding one-time costs related to the layoff), TMTA has some margin for error when it comes to the financial goals for 2003. By the end of 2003 or early 2004, the capital markets might well be far more hospitable than they are today.
As I said in an earlier post, TMTA has a fine balance sheet for an emerging tech company. After today’s CC, it appears that the balance sheet might be stressed a tad more than I had hoped, but I am not unduly worried.
If TMTA’s sales ramp nicely in 2003 -- if TMTA can become to INTC what JNPR has become to CSCO – TMTA investors should be well rewarded. Regards, Dew
Lojjm: your post nicely sums up my investment thesis for TMTA. The only thing I would state differently is your hope that, in terms of market share, TMTA can become in the mobile space what AMD is in the desktop space.
The analogy I prefer is JNPR vs CSCO in high-end routers. But first, let me return to AMD, which got its start in x86 compatible CPU’s as a second source (i.e. clone) for companies such as IBM which did not wish to rely on a single company (INTC) for the PC microprocessor. That AMD evolved into a full-fledged R&D shop is an accident of history owing to the favorable settlement of legal disputes with INTC.
JNPR, on the other hand, was conceived in a way very similar to TMTA. JNPR took aim at a relatively small portion of the router market (high-end routers for telecom carriers) and succeeded in capturing 20%+ market share despite the fact that industry experts predicted no one could possibly compete head-to-head with a company as formidable as CSCO. (Alas, JNPR has been felled by the malaise in the telecom sector, but that’s another story.)
If TMTA can accomplish as much against INTC as JNPR has against CSCO, TMTA shareholders will do very, very well over the next 5 years. And that’s not an unrealistic goal. JMHO. Dew
wbmw: some of your questions have simple answers:
>> R&D down: last 4 quarters it was $16-19M, and now it's $13.7M. Transmeta is cutting in the wrong places, but it doesn't look like they have a choice. My guess is that they reduced headcount. <<
Yes, they did have a layoff. It was announced at the July CC. Headcount was reduced from 480 to 295 (a 38.5% cut) during the third quarter. The drop in R&D from 2Q02 to 3Q02 was only 28.5%, which shows that there was a greater expenditure of R&D per employee in 3Q02 than in prior quarters. All of the above is part of the previously-announced plan to contain costs.
>> Cash burn: [cash] from $180M in Q2 to $156M in Q3, and forecasted to be $129M in Q4. It's a falling knife, and the trend has been there for the past 5 quarters at least. At this rate, it's not too long before it [cash] hits zero. <<
You are overlooking the one-time expenses for severance (and other out-of-pocket costs associated with the layoff). On a recurring basis, cash burn from operations has been reduced and is expected to remain at the new lower level in the fourth quarter.
>> Long term debt: this has gone up. Has TMTA been taking out any new loans? <<
You are overlooking the fact that debt is divided into two pieces: a portion listed under “current liabilities” and a portion listed under “long-term liabilities”. At 6/30/02, the two portions were 16156K and 22176K, respectively, for a total debt of 38332K. At 9/30/02, the corresponding numbers were 15640 and 23313, for a total debt of 38953K. In other words, total debt increased by just $621,000 during 3Q02.
(Moreover, this tiny increase was an accounting artifact which owes to the way TMTA calculates the present value of the license payments to IBM and Epson [the source of TMTA’s debt]. Since license payments are due in December, there are fewer quarters used for discounting the payments into a present value at 9/30/02 than at 6/30/02, which results in a slightly higher present-value calculation.)
--
wbmw: if you are still serious about investing in TMTA, I suggest that you at least listen to TMTA’s CC’s and read the company’s SEC filings. Regardless of your intentions vis-à-vis investing in TMTA, I continue to welcome your input from the INTC perspective. Regards, Dew
Amen. As an aside, I would wager that Svend Carlsen’s career with TMTA has been grievously harmed by his lame remarks at today’s CC.
If you want to be taken seriously as a company, you must have top executives who can be taken seriously. I’ve listened to at least 200 conference calls during the past 2-3 years, and the number of gaffes as bad as Carlsen’s can be counted on one hand of someone who has lost some fingers in an industrial accident. Dew
For once I actually agree with Glanta. I think that’s exactly how it went down.
Would have been amusing to be at the CC in person to see Perry’s facial expression when he answered the question asking why HP was the only U.S. Crusoe Tablet. I’ll bet there a wink in there meaning, “Our legal department told me I can’t say anything about HP exclusivity…but you get my drift.”
WSH: My explanation for the weak Q4 guidance is that the majority of mobile PC’s (of all varieties) is bought by corporations (this was confirmed by INTC’s CEO on yesterday’s CC), and corporations aren’t buying much of anything right now.
One tech-market researcher was quoted as saying:
“Christmas is coming but there’s no Santa Claus this year."
They answered your question in the CC. OEMs canceled orders during September.
Most tech companies have non-linear selling; if end-of-quarter orders don’t materialize, you’re screwed. TMTA is probably no exception.
Trade at 18:48 EDT at $0.81. A lot (but maybe not all) of the bad news was priced in.
I wont dignify your post with a response… other than the one I just made. Regards, Dew
>> Glanta's point was valid as of todays standards. <<
Not even close, Birdie. JMO.
>> A CFO should never own stock in the company he works for. <<
I respectfully disagree. If you want a good CFO, you have to pay him/her the going rate in cash or stock/options. TMTA, like most young tech companies, doesn’t have a lot of excess cash to plow into salaries for the corporate officers. So options and/or actual shares have to be part of the package.
All the noise that CFO’s should not own shares or options because it’s a conflict of interest is a crock. That way of thinking is simply a fad derived from the debacles at Enron, WorldCom, and Tyco.
The way to get an honest CFO is to hire an honest CFO and run a clean operation from the top down. It’s really that simple. FWIW. Dew
>> Amd loosing -74 cents are share <<
Watch your ‘o’s
>> Liked the guy calling in for insider sales. <<
That’s because he was buy-side and the others on the Q&A were sell-side. Buy-side people tend to ask questions that are important to actual shareholders rather than the silly de rigueur stuff typical of the sell-side analysts.
When it rains, it pours:
3Q miss and 4Q guidance down…ouch. As bad as the numbers are, the stock price is so low I’m still a buyer at these levels.
Regarding the path to profitability, there was no change in the guidance for either the timing (end 2003) or the amount of cash remaining at that point ($50M+).
They emphasized that most of the revenue growth will take place in 2H03. Models by some of us which assumed a relatively uniform growth rate over the 6-quarter period from 2Q02-4Q03 were evidently way off the mark. They will obviously need a humongous growth rate during 2H03 to pull this off.
Disappointed but still optimistic. Dew
Spin this:
From the mouth of INTC’s CFO:
http://www.thestreet.com/_yahoo/tech/kcswanson/10047959.html
>> CFO Andy Bryant explained that the gross margins came in at the low end because the company "fell short of some aggressive saving targets for materials and labor costs in manufacturing, and there were slightly higher than expected excess capacity charges."
<<
If Matt Perry (or any other TMTA executive) ever says anything that silly, I may have to reconsider my holding. Dew
The two flavors of Banias:
http://www.eetimes.com/printableArticle?doc_id=OEG20021015S0034
This clarifies the confusion about whether Banias will be based on a 130nm or a 90nm process. The answer is…both.
The initial Banias, due 1Q03, will be 130nm and a follow-up version based on 90nm will be out 2H03.
So the press reports a while ago which said Banias will be based on 90nm were only half wrong. Maybe we owe the L.A. Times half an apology. FWIW. Dew
ASP (and possibly market share) info from INTC CC:
http://messages.yahoo.com/bbs?.mm=FN&action=m&board=1602585284&tid=tmta&sid=16025852...
INTC webcast in an hour (2130 GMT) (eom)
TMTA has the highest-MHz Tablet:
The fastest Pentium-based tablets will run at 867MHz.
Of course, we know that raw MHz is meaningless. But it will be fun to watch INTC try to argue that MHz is not the measure of performance after all. LOL.
Link to relevant thread on Yahoo:
http://messages.yahoo.com/bbs?.mm=FN&action=m&board=1602585284&tid=tmta&sid=16025852...
>> Try very hard to keep a straight face while you read this <<
If you couldn’t keep a straight face while reading that one, you will need plastic surgery by the time you are done reading this:
http://biz.yahoo.com/bw/021015/150104_1.html
Key excerpt from the same Bloomberg article:
“Emerging markets will make up 40 percent of PC sales by 2006, Intel has said… [Barrett is] starting 70 ‘clubhouses’ in cities like Mumbai, India, that teach children to use PCs, and training classes that reach 600,000 teachers, with the biggest programs in China and India.”
The death of the PC market has been greatly exaggerated. There is still plenty of room for robust growth as living standards rise in the Third World. TMTA needs only a modest share of this opportunity to produce an extremely generous return for its shareholders. Dew
Amusing write-up. These “unofficial” tablet PC’s will likely get blown away when the MSFT-sanctioned models come out next month. JMHO.
Convergence:
The idea of an electronic Swiss army knife -- incorporating the features of a PC, phone, PDA, and possibly a camera in a compact package which runs all day on a single battery charge -- sounds compelling. But the history of multifunction devices is somewhat checkered. For example, boxes that do scanning, copying, and laser printing have never really caught on because the prices have been high relative to single-function devices with comparable performance.
The mobile PC/phone/PDA/camera may turn out to be big, but I am not basing my investment in TMTA on that assumption. Dew
INTC factoid:
Each year at this time, the WSJ lists the top 100 global companies in terms of market cap as of Sep. 30. (Financial companies are ranked by assets in a separate table.)
INTC’s rank has fallen from no. 3 in 2000 to no. 10 in 2001 to no. 21 in 2002. INTC ranks third among IT companies behind MSFT and IBM. FWIW. Dew
>> If you believe that balance sheets are "red herrings", than you have a different fundamental belief than I do, <<
wbmw: I did not say, nor did I mean to imply, that balance sheets are red herrings. To the contrary, the balance sheet is the first thing I look at when evaluating a company.
Here is what I actually said [message 2421]:
“…TMTA’s balance sheet is quite strong for an emerging tech company. So, not investing is TMTA because of the balance sheet sounds to me like a red herring. ”
I trust that you can see the difference between what I said and what you implied that I had said. Regards, Dew
A little circular logic:
I’d like to elaborate on Steak’s post. The TMTA bears argue that TMTA’s stock should be low because the company will run out of cash. Then, when the company runs out of cash, the dilution from raising cash will be painful because the stock price will be low. If you string the two halves of this argument together, the argument says that TMTA’s stock price should be low because TMTA’s stock price will be low -- and that is indeed circular.
I find TMTA’s path to profitability credible. Difficult but achievable. But for the sake of argument, let’s assume that TMTA does in fact need more capital within the next two years.
The explicit assumption in the circular argument above is that the bear market will persist and capital markets will remain depressed for at least the next two years. That’s possible, of course, but it’s far from a sure thing and not even highly probable, IMO. If TMTA’s stock price rises because sentiment in the capital markets improves, the dilution from a stock offering would become less of an issue and perhaps even a non-issue.
In reality, TMTA’s balance sheet is quite strong for an emerging tech company. So, not investing is TMTA because of the balance sheet sounds to me like a red herring.
If anyone does not believe in the prospects for TMTA’s technology, by all means they should stay away. But if you do like the prospects for the company’s technology, it strikes me as foolish to worry unduly about the balance sheet. FWIW. Dew
OT: Interesting write-up on Cognex in current Barron’s:
Does anyone here follow them?
>> thus the likelihood of a three month march from $.75 to $1.5 is an outside possibility ($1.5 is the bottom of a major technical gap and should serve as resistance on the way up). I have seen these short term counter moves in moribund stocks before. But the danger of being stuck and even seeing the stock drift further down has the same probability, IMTO <<
Appreciate you analysis, but it matters little to me when TMTA reaches $1.50 because I have no intention of selling any shares at that level. I think it’s reasonable to infer that many of the TMTA longs on this forum would agree. Regards, Dew
Zeev: I’ve followed the laser vision-correction industry for a number of years. The laser vendors have overlapping patents and are perpetually bringing or responding to lawsuits. In practice, the technical requirement that a patent be vigorously enforced against all infringers rarely comes into play in determining who is suing whom.
I reiterate that I consider it extremely unlikely that TMTA will have any material liability to Intergraph because so many of the concepts underlying parallel-instruction computing are in the public domain.
For the same reason, I think there is a high chance that INTC will prevail against Intergraph on appeal. Lower-court patent rulings have a tendency to focus unduly on the question of infringement and inadequately on the question of whether the patent claims are valid and enforceable. FWIW. Dew
>> …there is no way you reach $50 MM or $70 MM in sales quarterly, without increasing the SG&A, if you ever run a real life business, you would realize it. <<
If things go as planned, TMTA’s sales ramp will come from sharply increasing volume from a relatively small number of major customers – not from an exploding number of smaller customers. So selling expenses need not increase much if at all as unit volume increases.
>> When sales are growing SG&A is a larger percentage of sales. If they sat that these will not grow, they also say that sales will not materially grow. <<
I strongly disagree. As a percentage of sales, TMTA’s SG&A expenses should drop sharply as sales ramp.
It might be a good idea for you to speak by phone with one of TMTA’s financial executives to get a better understanding of the company’s business model. Regards, Dew
Zeev: TMTA’s guidance is for $20M of quarterly operating expenses through end 2003 including R&D and SG&A.
You may believe that this goal is unattainable, but that’s the company’s guidance per the July CC. Regards, Dew
>> AMD and TMTA are losing money, have been for some time. INTC makes profits, has been for some time. <<
But not as much as they used to. I think Lojjm was referring to the *trend* for INTC’s business model (down) rather than the absolute level of profits or losses.
BTW: I noticed your reference to the Grateful Dead MB. Does that mean you like Krispy Kreme Doughnuts?
>> Could good news from the market, or from TMTA possibly get a two-bagger out of the stock? <<
wbmw: if all you are looking for is a 2-bagger, I humbly submit that investing in TMTA would constitute an “overplay.” Regards, Dew
>> I see [TMTA] reaching $50 MM/quarter for the beginning and that is enough for break even, imho. I expect margins to improve with increased unit sales, improvement in the chip plus lower production costs due to increased competition on on the contract manufacture side. <<
I agree. To reiterate: $50M of quarterly sales at a 40% gross margin produces break-even with $20M of quarterly overhead.
I consider a 40% gross margin to be a middle-of-the-road figure for a company like TMTA during a normal industry environment. Unfortunately, now is not a normal period and hence gross margins are depressed.
But your point about increased aggressiveness in foundry pricing is germane. Some of the margin contraction from the “semiconductor nuclear winter” [ka-ching for Hseitz] will flow back to the foundries, giving more breathing room to the fabless designers such as TMTA. This will ease the pressure on TMTA somewhat while they wait for the overall business environment to recover. JMHO. Dew
Going nuts for doughnuts:
The Hartford Courant reports that this week, a man camped out for two nights outside a Connecticut Krispy Kreme shop in order to be the first in line for the store's grand opening.
OK, maybe it wasn't so dumb. For being first in line, the man won free doughnuts for a year.
But that doesn't explain the other people in line, like the guy who camped out in front of the store ... in order to buy one doughnut.
Ever wonder what happened to all those people who used to camp out in front of Grateful Dead concerts? Now you know.
[From thestreet.com]
Nasdaq SmallCap Market:
Here’s an example of a company switching from the Nasdaq NMS to the SmallCap Market:
http://biz.yahoo.com/bw/021011/112312_1.html
“TranSwitch Corporation, a leading developer and global supplier of innovative high-speed VLSI semiconductor solutions, announced today that The NASDAQ Stock Market® has approved its request to transfer its common stock to The NASDAQ SmallCap Market(SM) effective at the opening of trading on October 14, 2002. The Company's common stock will continue trading under the symbol "TXCC". Investors and other interested parties will see NO DIFFERENCE [emphasis added] in how they obtain stock price quotes, execute trades or find news about the Company, following the transfer to The NASDAQ SmallCap Market.”
--
Please, everyone, no comments about the fact the TranSwitch is trading for 23 cents. The point is that moving to the SmallCap market is a NON-issue except for bashers who wish to make it one.
>> [TMTA gets] an instant 50% gain in their stock’s value (1/3 * AMD price of $3.63 = $1.21) <<
Petz: You can’t be serious about TMTA’s BOD accepting $1.21/sh in AMD stock. I highly doubt that TMTA’s BOD would even SCHEDULE A MEETING to discuss any offer for less than $8 a share in cash or stock of a company that TMTA investors might want to own. (AMD is not such a company, IMO).
For more background, please see:
http://messages.yahoo.com/bbs?.mm=FN&board=1602585284&tid=tmta&sid=1602585284&action...
Regards, Dew