Investopedia: What's The Glide Path For Apple's Margins?

Wall Street is a quarter-to-quarter world, and that means analysts are always going to obsess over the unit and ASP numbers for Apple's (Nasdaq:AAPL) iPhone and iPad. What I think is more important to consider, though, is the future path of Apple's margins. The inexorable reality for consumer electronics companies is lower ASPs and lower margins, and lower margins are never good for stocks. Even conservative free cash flow growth assumptions suggest Apple shares are much too cheap now, but the realities of holding shares in a company facing persistent margin erosion may mean that it's a long path to reaping that value.

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Investopedia: MTN Group Has The Growth, But Ample Uncertainties

One of the predominant issues in telco service stocks right now is the weak growth environment – penetration rates in most developed markets are quite high, and competition makes it difficult to sustain any sort of real edge. That's not nearly as much of a problem for Africa's MTN Group (Nasdaq:MTNOY), given the low penetration rates and per-capita incomes in much of its territory, but the company has its own set of challenges ranging from regulatory, political, and economic uncertainties to the potential deployment of capital towards M&A.

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Investopedia: China Mobile Trades Growth For Stability

Investors may be frustrated with some of the decisions that China Mobile (NYSE:CHL) management has made in recent years, but at least they can say that the company is what it is – a leading wireless service provider focused exclusively on China and built around generating solid and predictable returns on capital and free cash flow. With that in mind, China Mobile looks like a solid investment pick, particularly for those investors looking for above-average dividend potential.

Will 4G Justify The Investment?
China Mobile has been ramping up its 4G network plans, and spending on this rollout is likely to be a key story over the next couple of years. Management has targeted having 200,000 base stations in 100 cities by the end of the year, with an official launch of service either late this year or early next. Assuming the company keeps to that schedule, it should provide an effective one- or two-year headstart.

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Seeking Alpha: Taking Setbacks In Stride, MTN Group Should Be Ready To Outperform

To at least some extent, this has been one of those "if it can go wrong, it will" years for South Africa's MTN Group (MTNOY.PK). And yet, despite setbacks in Nigeria, Iran, and Syria, MTN Group continues to post solid revenue growth, expanding margins, and excellent returns on capital, while generating more cash than it needs to run the business. While political risk is always going to shadow MTN Group, this looks like an undervalued play on one of the best remaining growth stories in mobile services.

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Taking Setbacks In Stride, MTN Group Should Be Ready To Outperform

Investopedia: PCTEL May Be Signaling "Buy"

Investors aren't going to find too many small companies with PCTEL's (Nasdaq:PCTI) record of returning cash to shareholders. In addition to paying a special dividend a few years ago, the share count here has declined about 20% since 2007. All of this has been achieved despite a clear breakout product and the fact that revenue for 2011 was more than 10% below the level back in 2006.

Unfortunately, value-oriented tech companies seldom get their due. While PCTEL has a decent business in antennas and mobile network test equipment, it's going to take more than that to make the shares really exciting. Luckily for investors, there is an iron in the fire that just might make this a more interesting name in the future.

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Investopedia: Is China Mobile Too Successful To Succeed?

You would think that holding two-thirds of any market in China would be sufficient to keep a stock near the top of many investor's buy lists. That's not the case for China Mobile (NYSE:CHL), though, as investors fret about the impact of regulatory interference in the Chinese mobile market and wonder just how China Mobile will continue to deliver growth as the company gets ever larger.

Share Erosion a Modest Concern  
Although China Mobile still has about two-thirds of the Chinese wireless market, that number has been declining in recent years as Chinese regulations have favored rivals China Unicom (NYSE:CHU) and China Telecom (NYSE:CHA) and allowed these companies to gain momentum.

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Investopedia: Marvell Starting To Get Interesting

Often one of the tricks to investment success is counter-intuitive investment instincts. In the case of chip company Marvell Technology (Nasdaq:MRVL), it may seem silly to be interested in this name when its storage business is threatened by flooding that has hit its customers, and its wireless business continues to suffer as its major customers wither under competition. All of that may be true, but it ignores the facts that this company is getting more diversified, and still manages to generate attractive amounts of free cash flow.

A Challenging Third Quarter  
Relatively few chip companies are reporting great earnings right now, and that's particularly true for those with high levels of exposure to PCs and Research In Motion (Nasdaq:RIMM). For this quarter, Marvell reported that revenue fell 1% from the year-ago level, but rose 6% on a sequential basis. The company's storage business (chips that control hard disk drives) saw 11% growth from last year and flat sequential performance, while the networking business was up 7% and also flat from the second quarter. Mobile/wireless was more mixed - down 15% from the year-ago period, but up 20% from the second quarter as the company navigates past its RIM issues.

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Investopedia: American Tower Still Great, And Still Expensive

Communications tower owner American Tower (NYSE:AMT) knows well what many landlords have long realized; it is a great business to own a valuable asset that your customers can't build for themselves, but must have in order to stay in business. Better still, not only is there still growth potential in the U.S., from higher occupancy, more towers and higher prices, but even greater potential overseas.

A Fairly Good Third Quarter  
There are no complaints with the top line numbers that American Tower reported. Revenue rose almost 23% to $630 million, surpassing the average analyst estimate and matching the high end of the range. While overseas growth was eye-popping at 79% year-on-year, domestic growth of 9% is pretty good, in its own right, considering how mature the U.S. mobile phone market is.

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http://stocks.investopedia.com/stock-analysis/2011/American-Tower-Still-Great-And-Still-Expensive-AMT-VOD-SBAC-VZ-T-S-CCI-TEF-FTE-CHL1102.aspx

Investopedia: Sprint Garrotes Clearwire

If there were anything approaching justice in the business world, Sprint (NYSE:S) and Clearwire (Nasdaq:CLWR) would be forced to stay joined at each other's hip, forever. If an investor wants to see two case studies in how companies can completely screw up a potentially lucrative wireless business, these are the companies to seek out. Now with both companies deep in a hole, Sprint has decided to bring out an ever bigger shovel, but this may ultimately be the shovel that buries Clearwire.

We'll Go Our Own Way  
Sprint and Clearwire have worked together for quite some time, with Clearwire basically serving as the 4G network for Sprint. Unfortunately, Clearwire has not done a great job with its rollout. Although the company is rolling in valuable spectrum and was an early-mover in 4G, dead spots in urban areas became an unacceptable problem, and Clearwire's geographic coverage expansion slowed to a crawl. What's more, Clearwire has bickered with its partners over rollout strategies along the way, including Sprint.

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http://stocks.investopedia.com/stock-analysis/2011/Sprint-Garrotes-Clearwire-S-CLWR-VZ-T-VOD-CMCSA-CHL-TWC1014.aspx

Investopedia: Can Sprint Nextel Unlock Value?

By most reasonable standards and projections, Sprint Nextel (NYSE:S) is too cheap. But aside from a bounce out of late 2008, this has been a terrible stock to own for many years, and the glory days when Sprint stock carried a "6" or "7" handle seem long ago indeed. When terrible stock performance and apparent value are paired together, it's often a sign that Wall Street has minimal confidence in management. Although Sprint Nextel management has earned the doubt of any benefit, the company may nonetheless not be getting nearly enough credit for what it may be able to do.


A Bizarre Analyst Meeting
Sprint Nextel recently hosted an analyst meeting, and while these are normally intended to add clarity to a story and allow management to explain its vision, it seems like most investors walked away with a lot of lingering doubts.

It certainly did not help matters that the meeting got testy when analysts really ratcheted up the questions in response to Sprint's announcement that it would be launching its own 4G network, leaving Clearwire (Nasdaq:CLWR) out of it, stopping the sale of Clearwire-compatible devices by the end of 2012.



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Investopedia: China Mobile May Be Right For The Times

There are plenty of reasons not to like China Mobile (NYSE:CHL). Not only is China's largest cell phone operator closer to the Chinese government than many investors will find comfortable, but the company is also likely well past the point of exciting top-line growth. All of that said, though, this is a company with major market share, hand-over-fist cash flow generation, and a very solid business. Given how turbulent the markets are and the spasms that go with even modest disappointment, China Mobile looks like a dividend growth idea where investors can lay low for a while. 

Second Quarter Results - Solid, But Not Scintillating  
China Mobile's results probably won't impress casual observers, but they were better than many analysts had expected. First half revenue rose almost 9%, while second quarter revenue rose a half-point more. Second quarter EBITDA rose more than 7% (and margins compressed about 80 basis points), and net profit was up 7%. (For more on EBITDA, see A Clear Look At EBITDA.)

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http://stocks.investopedia.com/stock-analysis/2011/China-Mobile-May-Be-Right-For-The-Times-CHL-CHA-CHU-AAPL-JDSU-ALU-ERIC0819.aspx

Investopedia: Should Investors Ride Along With Ctrip?

As growth in the U.S. looks increasingly shaky and investors try to figure out which listed Chinese companies tell the truth, well-established names like Baidu (Nasdaq:BIDU) and Ctrip (Nasdaq:CTRP) seem to be getting a little extra love. The question, though, is whether Ctrip's valuation already more than credits the company for its likely impressive future growth in China's travel industry. 

Some Reasons for Concern in Q2  
Top line revenue for Ctrip was a solid 20% and in line with analyst expectations. Hotel booking is still the largest individual revenue component and grew about 16%. Air ticketing was weaker, though, as lower commissions offset higher volume, and growth came in at 13%. Packaged tours continues to be a growth driver, and Ctrip saw 62% higher revenue from this category in the second quarter.

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Investopedia: Marvell Bottoms Out

The Street reacted very favorably to Marvell Technology's (Nasdaq:MRVL) first quarter earnings report. Actually, it wasn't the quarterly earnings that anybody cared about, it was the stronger guidance for the next quarter and the evidence that business may have bottomed out. Although there are still some cosmetic risks to the Marvell story in addition to the fact that Wall Street appears to be re-warming to the name, investors may still be able to pick up shares here and look at the price as a bargain. 

A Tough Start to the Year
Nobody expected Marvell to have a good first quarter, and Marvell obliged with a pretty pungent set of results. Revenue fell 6% from the year-ago first quarter and 11% from the prior quarter, led by a 30% sequential drop in sales from chips for the mobile and wireless markets. Hard drive controller chip sales also slipped (down 1% sequentially), while networking sales rose 4% (but contributed less than 25% of total sales).

As is pretty typical for tech companies, operating leverage cuts both ways and revenue declines turned into even bigger drops in profitability. Gross margin retreated about 40 basis points from the January quarter (and a point and a half from the year-ago level), and operating margin dropped more than five full points, as operating income fell close to 30% on both an annual and sequential basis.



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Investopedia: The Return Of The Norsemen?

Like its fellow Nordic tech brother Nokia (NYSE:NOK), Ericsson (Nasdaq:ERIC) can only look back fondly on the days when it was a favorite of the tech crowd. Not only did the excessive build-out of the late '90s poison the well, but Ericsson has had to deal with the rise of Chinese competitors like Huawei and aggressive marketing and pricing moves from rivals like Alcatel-Lucent (NYSE:ALU) just trying to stay in business.


A Surprisingly Strong First Quarter
Even though Ericsson is not a widely loved stock in the analyst community, the business has been staging a comeback, and the first quarter was surprisingly strong. Revenue rose 17% as reported, and although this was a 16% sequential decline, it was better than analysts had expected. It is also worth noting that on a constant-currency basis year-over-year growth was actually on the order of 25% - a pretty respectable quarter by any standards.


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Investopedia: Will Brazil's Government Ruin A Good Thing?

CEOs come and go, but sometimes the circumstances matter. That is especially true in the case of Brazilian mining giant Vale (Nasdaq:VALE), which has recently announced that its CEO, Roger Agnelli, will be stepping down. 


This is not a case of a CEO leaving for a better opportunity, "to spend more time with family," or to enjoy a well-earned retirement. Instead, Vale's CEO is basically being run off by the Brazilian government, who apparently wants a more pliable and compliant executive running one of the country's largest companies.

Not only is this a serious matter for Vale shareholders, who are losing out on the continued leadership of an executive who was at the very least competent, but it is a serious matter for all investors with an interest in Brazil. While there can be a healthy and spirited debate about the balance between public and private interests, direct interference in a publicly-run company sets a dangerous precedent and Brazil's government had better be careful or risk falling out of favor in many investors' eyes. (For related reading, see Cautionary Signs For International Investors.)


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Investopedia; Marvell Technology - Not So Marvell-Ous

In semiconductors, mix matters. That looks to be one of the key problems with Marvell Technology (Nasdaq:MRVL) today, as smartphones and tablets chew into the company's PC and hard drive markets, and the company has little in the wireless space to offset it.

A Tough End to the Year
Although full year-on-year comparisons for Marvell look quite good, hardcore tech investors pay virtually no attention. Instead, the company's fourth quarter sequential revenue growth contraction of 5% is the real story, particularly as the company almost completely missed the Street estimate range. Unfortunately, performance was "bad" and "worse" as revenue in the storage and drive segment fell 2% sequentially and the mobile/wireless segment dropped 13%. Networking was what passed for good news, with flat performance. (For more, see Semiconductor Equipment: The Small and Skeptically.)

To the company's partial credit, margins held up. Gross margin was only off by about 10 basis points from the third quarter (though down more than that from the year-ago level). While operating income did drop almost 17% from the third quarter, a large part of that was due to higher R&D spending.


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Investopedia: Is The New Smartphone ETF A Smart Idea?

Smartphones have proved to be a breakaway success in consumer electronics - not to mention a multibillion-dollar market opportunity. Not surprisingly, this has fueled runs in a number of stocks and significant investor interest in playing the ecosystem. Now, investors have an easier one-stop shop for this play with the introduction of First Trust's Smartphone Index Fund (Nasdaq:FONE). (For some background on the smartphone market, check out The Apple Ecosystem.) 


Smartphone ETF: How It's Built
FONE is an exchange-traded fund (ETF) that is designed to closely track the Nasdaq OMX CEA Smartphone Index. This index includes a variety of companies organized into three primary categories - handsets, software applications and hardware components, and network providers - with 45% weightings to the first two and 10% to the last. Within each segment, the components are equally weighted.

The Good 

There is no question that FONE offers a diversified play on a broad definition of the smartphone market. All in all, the fund holds 73 positions with the top 10 positions amounting to about 28% of the total holdings. While the expense ratio is something of an issue, it is hard to see how a retail investor could assemble anything close to a diversified portfolio of similar component, service and equipment stocks and not spend more in commissions.

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http://stocks.investopedia.com/stock-analysis/2011/Is-The-New-Smartphone-ETF-A-Smart-Idea-FONE-AAPL-BRCM-GOOG-MSFT-FLEX-ARMH0301.aspx

Motorola Back From The Dead This Halloween

Motorola (NYSE:MOT) was not supposed to do this. The company was supposed to be dead and buried, and just another entry in the pages of American technology companies that used to matter but could not compete. And yet, here the company is - revitalized by the smartphone boom and perhaps with another chance to make a real go of it.

Nothing Spooky About The Quarter
Motorola reported that total revenue rose 6% in the third quarter, with revenue from continuing operations up 13% to nearly $5 billion. The difference comes from the part of the networking business that is being sold to Nokia Siemens Network. Overall, GAAP earnings per share were 5 cents a share, a 400% increase over 2009 third quarter earnings. The year-over-year increase was similar in non-GAAP earnings which increased from 6 cents to 16 cents, well above the company's guidance figures. 


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Agile Agilent

Agilent (NYSE:A) has always been something of an odd one out. Although the company boasts a market capitalization of approximately $10 billion, Agilent is relatively under-followed and often overlooked. Some of that is because of the unusual collection of businesses. The company has historically derived about half of its revenue from electronic test and measurement equipment and the other half from biological and chemical analysis equipment, and few analysts have expertise in both of those markets. 

What may be Wall Street's pain can be a motivated investor's gain. Because Agilent does not get the close scrutiny of other names, and because there is not a small army of analysts flogging the stock to institutional clients, investors can occasionally pick these shares up on the cheap.

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China Mobile's Search For Growth

You can never really tell what a company's management team will come up with when thinking about how to fuel the next leg of growth. While I can understand why China Mobile (NYSE: CHL), China's largest mobile phone company, might want to diversify and deploy some of its substantial cash holdings, I was initially a little surprised by the latest idea. 

According to a very brief announcement from Xinhua News Agency, China Mobile and Xinhua are going to collaborate to launch a new search engine company in China. So, a company that has enjoyed a sizable market share virtually from the first day of operation is volunteering to challenge Baidu (Nasdaq: BIDU) and Google (Nasdaq: GOOG) on their home turf. 


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