Investopedia: 8 Tech Stocks With Big Dividends

Technology is a perennially hot space for investors looking for momentum or growth ideas, but it can also be a fertile area for investors who like to couple earnings growth with dividends. Although the range of "dividend growth" options in the tech sector is still limited when compared to more traditional sectors like consumer staples, dividend investors have a few valid options when it comes to diversifying toward the tech sector. (For background reading, see Why Dividend Matter.)

Dividend-Paying Chip Makers 

It may seem odd that an industry known most for its cyclicality, high capital needs and threat of obsolescence, but many of the better dividend-growth ideas in technology are found among the semiconductor companies.

Analog stalwarts Analog Devices (NYSE:ADI) and Linear Technologies (Nasdaq:LLTC) both offer double-digit returns on invested capital, ongoing growth prospects and yields above 2%. Investors can also collect a healthy dividend from Taiwan Semiconductor (NYSE:TSM) - the world's largest fabricator of semiconductors - and a likely beneficiary of what will almost certainly be an ongoing trend of companies focusing on design and marketing and outsourcing manufacturing to the fabricators. (For related reading, see Top Dividend Plays For 2011.)

Intel (Nasdaq:INTC) also stands out with a current yield of about 3.4%. Many investors have written off Intel due to the migration of consumers toward smartphones and tablets, but that may be hasty. Intel absolutely has some catching up to do, but if these devices are here to stay, Intel's enormous R&D budget could very well buy it back into the race.

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Investopedia: Can Nokia And Microsoft Recapture Their Magic?

Human beings are nostalgic creatures, and "retro" often plays well. Millions of people enthusiastically played the Pac-Man doodle that Google (Nasdaq:GOOG) offered up on that game's 30th anniversary. More recently, the SyFy channel ran a B-movie reuniting Tiffany and Debbie Gibson and over 2 million people actually chose to watch it.

So then, will the union of Nokia (NYSE:NOK) and Microsoft (Nasdaq:MSFT) bring customers and investors back to the glory days when these were among the leaders in the tech world, or is this just a Wall Street version of "Mega Python versus Gatoroid"?    

Nokia Looking To Shake Things Up 

Nokia's new CEO, Stephen Elop, is clearly not pleased with how prior management of Nokia effectively painted the company into a corner. True, the company still has the number one worldwide share of cellphones, but the company has virtually no momentum in the smartphone market and has been effectively no threat at all to Apple (Nasdaq:AAPL), Motorola (NYSE:MMI), Research In Motion (Nasdaq:RIMM) or the Taiwanese and Koreans. In fact, Mr. Elop recently wrote in a memo that Nokia was essentially "standing on a burning platform" and had to make major changes to survive.

Going With Another Also-Ran? 

Instead of waiting to see whether the company's new Symbian platform could hold the answer to a recovery, Elop has chosen to ally the company with Microsoft instead. In essence, the two companies will combine assets and know-how to jointly develop new smartphone technology. This is hardly a rerun of the WinTel duopoly that was so successful in the 80s and 90s.

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Investopedia: Cisco's Painful Transition

Nothing lasts forever.

That is the unfortunate reality that seems to be striking Cisco Systems (Nasdaq:CSCO) these days and spooking analysts and institutional investors. The question, though, is whether or not a Cisco that may not be quite as dynamic as it used to be is still a worthy consideration for an investor's tech portfolio.


A Spotty Quarter
On first glance, Cisco seemed to post a solid fiscal second quarter. Revenue grew 6% and exceeded even the high end of the range of analyst estimates. Although routers grew 5% and revenue from new products was up 15%, switches were down 8%.

Gross margin is likely to be one of the biggest talking points of the quarter. Whether looking at GAAP or adjusted numbers, gross margin fell and fell hard (down more than four points by GAAP accounting and three points with adjusted numbers). While the company tried to pin some of the blame on new product launches, a mix shift seems to also be a significant factor as the highly profitable switching and routing businesses are not strong. Sales and marketing expenses and R&D did not seem out of line or worrisome, but the damage to the gross margin line was more than enough to be problematic. That said, reported earnings for the quarter were still better than expected. (For more, see Ratio Tutorial - Gross Profit Margin.)


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Investopedia: Atmel Off To The Races

Some investors want nothing to do with companies that are in the midst of turning around their business and repositioning themselves for future growth. Well, that is their loss. Not all companies succeed in self-improvement to the extent that Atmel (Nasdaq:ATML) has, but this not-so-little semiconductor company is a good example of the rewards that can accrue when patient shareholders and committed management intersect. 

A Strong End to a Strong Year
Atmel has been doing better for a little while now, but the fourth quarter put something of a finer point on that. Revenue rose 3% sequentially and 33% from last year, which is not only above what analysts had projected, but rather compelling in comparison to rivals like Cypress (NYSE:CY), LSI Logic (NYSE:LSI) and Microchip Technology (Nasdaq:MCHP). Better still, that growth rate is somewhat inaccurate on an as-reported basis; subtracting the Smart Card business (which the company divested) shows sequential growth of 10% and year-on-year growth of 44%.

Clearly, then, thing are going well for this company. The company's microcontroller business is doing well, and Atmel is gaining share in the non-Apple gadget market with its line of maXTouch controllers (which basically run the touch-screen interfaces). Atmel is already on board with devices from Nokia (NYSE:NOK), Motorola (NYSE:MOT), and HTC and although it has a formidable competitor in the likes of Texas Instruments (NYSE:TXN) (as well as Cypress to some extent), these chips are gaining share and impressing designers. (For more, See Texas Instruments Suggests A Soft Landing In The Works.)


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Investopedia: Texas Instruments Suggests A Soft Landing In The Works

Figuring out the semiconductor industry is a little like playing one of those games where you are supposed to guess at what the image is as it is revealed a piece at a time. While Linear Technology (Nasdaq:LLTC) started the reporting cycle with a sour note, Maxim (Nasdaq:MXIM) seemed incremental better, and so too now does Texas Instruments (NYSE:TXN). If Texas Instruments is more indicative of the "real" state of the industry than Linear, perhaps the worst of the mid-cycle correction is over. 

A Mixed End to a Rebound Year
As is so often the case, the strength of Texas Instruments' quarterly results depends very much on the frame of revenue. After all, 17% year-on-year revenue growth sounds good - up to the point when it translates into a 7% decline in sequential performance. Analog is TI's biggest segment, and revenue here was up 20% annually and down 4% sequentially, while embedded processing saw a 31% annual increase and 7% sequential decrease. Wireless was comparatively boring, up 1% from last year and flat relative to the third quarter.

Profitability was not quite as positive for TI. Due at least in part to higher capacity and lower utilization, gross margin fell 150 basis points from last year. Although the company did do a solid job of holding the line on operating expenses, the decline in gross margin led operating margin to contract about 200bp on a sequential basis, while rising 170bp from last year after adjusting for a divestiture gain. (For more, see  The Bottom Line On Margins.)

Orders fell 4% from last year and 9% from the third quarter, leading to a 0.89 book-to-bill ratio. While management did say that lead times were back to normal (suggesting that the book-to-bill should have bottomed), it is worth noting that inventory did climb almost $100 million on a sequential basis and stands (on a days sales basis) at a pretty high historical level. 



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Investopedia: Qualcomm Takes Another Shot At Diversification

t is hard to express all that much sympathy for CEOs who routinely take home millions of dollars for their work, but that doesn't mean they don't face some significant challenges. In particular, management at a company like Qualcomm (Nasdaq:QCOM) is under the seemingly constant pressure to reassure Wall Street that not only is the existing business producing sustainable growth, but that there are avenues to even further growth.

To that end, Qualcomm has had its struggles in expanding beyond its core CDMA technology. With the acquisition of Atheros (Nasdaq:ATHR), though, QCOM is taking a larger bite at the cherry and may just find that it has hit on a winning formula here.

The Qualcomm/Atheros Deal 

Atheros shares spiked on Tuesday as rumors swirled that Qualcomm was about to offer $45 a share for the company. As it turns out, those rumors were pretty much spot on - Qualcomm announced Wednesday morning that it was acquiring Atheros for $45 per share in cash, or a total value of $3.1 billion (before netting out Atheros' cash). At a price of $45, Qualcomm is paying a little more than 18 times trailing EBITDA and a better-than-20% premium to the pre-rumor price of the shares. (For more, see A Clear Look At EBITDA.)

What Qualcomm Is Getting 

In buying Atheros, Qualcomm is getting a company with a strong WLAN/Wi-Fi business. Atheros' chips are used in a variety of computers, networking equipment, and mobile devices, and the company has recently started trying to expand into areas like ethernet and GPS. Atheros has a rather broad customer base, but not necessarily a very broad business portfolio. To that end, that may have been part of Atheros' motivation in selling out - avoiding the struggles and setbacks that so often occur when specialized chip companies move into new and relatively unfamiliar business lines. (For related reading, check out 2010: The Year In Chips.)

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Is RIMM Losing The War?

Research In Motion (Nasdaq:RIMM) would not be the first company to largely invent a market, only to see latecomers take the business away from them. Although it is absolutely fair to debate whether RIMM's Blackberry "invented" the market that Apple (Nasdaq:AAPL), Google (Nasdaq:GOOG) and Motorola (NYSE:MOT) are profitably exploiting now, the more relevant question is whether RIMM can withstand the battles in the market and remain a top competitor. After all, Nokia (NYSE:NOK) was seen as a leader once, too. 

A Bright Quarter With A Dark Shadow
In many respects RIMM delivered a fine quarter. Revenue rose 40% from last year (and 19% sequentially) to almost $5.5 billion, with handset revenue and shipments increasing by similar degrees. Given that RIMM surpassed the average estimate and was close to the high end of the range, that would normally be good news. On the other hand, U.S. revenue dropped 16% sequentially despite an aggressive promotion of Torch at AT&T (NYSE:T) and channel inventory ticked up - while either of these events on their own may be no problem, the combination is a valid reason for concern.

Nevertheless, profitability at RIMM is still good. Gross margin improved almost a full point from last year (though declined more than that sequentially), and operating margin was modestly better. All in all, operating income rose 42% from last year (and 16% from last quarter), while net profits rose 45%. RIMM also did well from a cash perspective, adding about $450 million in cash to the balance sheet. 


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Hey Clearwire, Sprint May Just Not Be That Into You

What happens if someone pulls out all the stops to throw a legendary party, and then nobody shows up? Or, alternatively, people show up but the host goes bankrupt before the party really gets going? That may encapsulate the preeminent fear about would-be 4G giant Clearwire (Nasdaq:CLWR). The company is burning cash at a prodigious rate, Verizon (NYSE:VZ) and AT&T (NYSE:T) continue to go about their business, and Sprint (NYSE:S) seems outwardly a little more skittish about its unofficial subsidiary. 

A $1.3 Billion Debt Top-Off
About two weeks ago, Clearwire closed on a round of financing that brought the company over $1.33 billion in additional debt. Two tranches went out with coupon rates of 12% (though the '15 debt is trading at a yield-to-maturity of about 8.8%), while the third was a convertible with a coupon of 8.25%. Clearly, then, we are not talking about a AAA issuer. As part of its special relationship with the company, Sprint will have the right to participate (buy debt) up to 50%, and so the company may issue more debt (in excess of $700 million) within the next month.


Clearly the company needs the cash. Clearwire's capital expenditures have been averaging over $650 million a quarter lately, but the company had about $1.3 billion in cash and short-term securities on the balance sheet at the end of the September quarter (as well as an inconsequential amount of receivables and long-term investments). With this deal, then, Clearwire has bought more time but this is quite likely not the last time the company will need to raise capital.


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Avago Looks Like A Relative Bargain

It looks like semiconductor slowdown worries are mostly in the past. Looking across the chip space, particularly the analog sector, most of the major players are either at or very near 52-week highs. While Avago (Nasdaq:AVGO) is likewise near its high for the year, investors may nevertheless want to look a little further and see whether this name might offer a relative bargain in this sector. 

An Okay Quarter To Close The Year
Avago's fiscal fourth quarter earnings showed a familiar theme in the chip sector - good year-over-year growth, okay sequential growth and a warning of sequential contraction early in 2011. More specifically, the company reported that total revenue grew 4% on a sequential basis (up 34% from last year), as sales into the wired segment grew 15% from the Q3 while consumer and computing sales dropped 22%.

Profitability fared better, though. Gross margin improved whether an investor looks at the GAAP, non-GAAP or adjusted non-GAAP numbers. The GAAP numbers show a 50 basis point sequential improvement and a substantially better jump from the year-ago level. Avago also reported more positive leverage through the operating and net income lines.

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Seagate Decides To Stay Public

With mergers going off left and right in the tech space, particularly in the storage area, it is a bit of a switch to hear about a deal that does not happen. But that is the case for disk drive maker Seagate Technology (NYSE:STX), which announced after the close on Monday that the board had decided to end discussions of selling the company to private equity investors. 

Where was the Bar?
Although the company had publicly acknowledged some indications of interest in taking the country private back in October, the recent rumors were that potential deals were falling apart as private equity groups balked at the price. There has been no public discussion of what Seagate believed was a "fair price", but it would not be surprising if $20 was the starting point that the board had in mind. After all, even though companies like 3Par ,being acquired by Hewlett-Packard (NYSE:HPQ), and Isilon Systems (Nasdaq:ISLN), being acquired by EMC (NYSE:EMC), are very different than Seagate, there might nevertheless have been an element of "storage is storage" mentality and an expectation from the board of a solid premium. 


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Still Good Weather In Aruba

With the normal fall chill in the air in most parts of the country, Aruba seems like an increasingly pleasant destination. Tech investors seem to share that feeling, as Aruba Networks (Nasdaq:ARUN) has been an incredible performer over the past year. With this WLAN supplier having nearly tripled from its lows, it is fair to wonder how much gas is left in the tank. 

No Real Slowdown ... Yet
Aruba posted strong results for the fiscal first quarter, but analysts had been calling for precisely that. Revenue rose 44% on a year-over-year comparison and 8% sequentially. That is a little less growth momentum than in the prior quarter (where the top line grew 45% annually and 12% sequentially) but not significantly less. 

Below the top line, performance was once again good but not all that much better than expected. Gross profit rose 49% and gross margin did expand to 72%. That is above the company's target range and a function of new products as well as a higher mix of software. At the bottom line, on a non-GAAP basis, earnings more than tripled from the year-ago level.

The Road AheadAs Aruba is the No.2 player in WLAN (wireless networking for companies and large organizations), the spread of smartphones and tablets has to be a positive sign. When Research In Motion's (Nasdaq:RIMM) Blackberries started getting traction, there was a need for corporations to adjust their network and security needs to facilitate the technology. Now whether the device comes from Apple (Nasdaq:AAPL), Samsung, or Motorola (NYSE:MOT) and whether or not it runs Google's (Nasdaq:GOOG) operating system, there is the opportunity (and need) to access much more of the company network in an effective and secure way.

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Cisco's Head Cold Isn't A Tech Plague

Not all bellweathers are created equal. True, Cisco (Nasdaq:CSCO) is an incredibly significant player in networking equipment and software, but the product and customer overlaps are never perfect across any sector. What that means for investors is that Cisco's near-term business issues may not be a sign of doom for the sector, and nimble investors may want to keep an eye out for stocks that get cut down unnecessarily. 

Cisco's Bad News
Cisco reported decent fiscal first quarter results (sales up more than 19%; operating income up 14%) but guidance was very problematic. It looks like Cisco is seeing low-to-mid single-digit growth in its second quarter (the calendar fourth quarter) and may post less than double-digit growth for the full fiscal year. Perhaps not too surprising, the biggest sources of weakness for Cisco are public (government) customers and European customers - two market segments where debt burdens and weak spending budgets are major issues. In fact, state governments' orders plunged 48% on a quarter-over-quarter basis.

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Atmel Lives Up To Expectations ... And Then Some

What is the best thing a company can do when its shares look overvalued? Deliver excellent quarters with better-than-expected performance and grow into that valuation. That seems to be the theme for microcontroller maven Atmel (Nasdaq:ATML), as a great earnings report should help maintain what has been torrid momentum in the second half of this year. 

Nothing "Micro" About The Quarter
Despite plenty of evidence from analog giants like Linear Technology (Nasdaq:LLTC) and Texas Instruments (NYSE:TXN) that ship-ahead risks may prove real in many sectors (especially computers, but also industrial and automotive to some extent), Atmel logged a fine quarter and guided toward sequential growth.

Revenue jumped 40% this quarter on an annual basis, and 13% sequentially. The microcontroller business was even stronger, with 29% sequential growth and nearly $256 million in revenue contributions. All in all, it was good enough for a 4% beat, relative to analysts' expectations. (For more, see Strategies For Quarterly Earnings Season.)


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Will Gorilla Make Corning King Of The Jungle?

There have been a few times during Corning's (NYSE:GLW) history where it seemed like the company could not buy a break. No company had more share of the telecom-fueled fiber boom of the late 90's, but Corning had little to show for it when capex demands sucked away the cash. With the advent of LCD panels everywhere, it looked like Corning might be in a for a second act - a boom in demand coupled with a loud sucking sound from the cash flow statement. With the LCD revolution seemingly here to stay, though, and the emergence of Gorilla Glass, could Corning finally have a more stable configuration? 


The Quarter Was What They Thought It Was
Corning delivered a third quarter performance that was inline with the company's earlier (negative) pre-announcement. Sales fell 6% on a sequential basis, though they were up 8% versus last year's level. This drop was led entirely by the company's display business (which is close to half of sales) - sales here fell 23% from the second quarter, while the other segments mostly showed decent growth.

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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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Atheros and Texas Instruments - Chips Ahoy

Atheros (Nasdaq:ATHR) and Texas Instruments (NYSE:TXN) are indeed very different kinds of chip companies, but there are basically in the same boat today. The big rebound in chip demand is over, demand and supply are basically back in alignment and investors are probably looking at a couple quarters of uninspiring performance before growth returns. 

The Quarters That Were
Atheros reported 4% sequential sales growth, as an exceptionally strong result in the consumer business offset weakness in PCs and networking. Inventories rose by 10% on a sequential basis, and the company trimmed fourth quarter guidance by about 10% relative to prior expectations. While the company has quality customers like Hewlett Packard (NYSE:HPQ) and Amazon (Nasdaq:AMZN), consumer products cannot fully compensate for the weaker PC and networking environment. Atheros is still small enough that individual product delays like the pushout of Nintendo's 3DS still matter.

For the far larger Texas Instruments, sales were up a similar amount - 7% on a sequential basis. TI did see an improvement in gross margins, though. Performance was strongest in high-performance analog, but a 0.92 book-to-bill is not encouraging, and it looks like TI is in for a couple of quarters of sequential revenue declines. That is broadly consistent with what Linear Technology (Nasdaq:LLTC), another major analog player, has been saying and TI management does not seem to see anything unusual in this mid-cycle slowdown. (For more, see Is Linear A Canary Or A Duck?)

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Single Digits ... But Not Growth Midgets!

In theory, the price of a stock should be irrelevant to its prospects. In practice, though, there are always investors looking for low-priced stocks that could significantly boost the returns in their portfolio. Although we strongly urge investors to avoid the penny stock casino, there are some single-digit stocks that could be worth a further look. 

Atmel (Nasdaq:ATML)
Investors had to wait quite a while for this long-struggling chip stock to get moving, but it has done quite well so far this year. While expectations may have gotten ahead of reality in the short term and there could be some inventory risks in the company's industrial and automotive business segments, there is a lot to like about this company. Not only does the company have a good microcontroller business, but the company's maXTouch product for touchscreens has done well with customers like HTC, Samsung and Motorola (NYSE:MOT). Touchscreens are here to stay, and that could vault Atmel back into the ranks of a growth semiconductor company.

 
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Good Luck At Nokia, Elop, You'll Need It

Can a company simultaneously be No.1 in its industry and still be doomed? If the company in question is Finland's cell phone giant Nokia (NYSE: NOK), then the answer would seem to be "yes". While Apple (Nasdaq: AAPL), HTC and Research In Motion (Nasdaq: RIMM) rocket ahead with smartphones, analysts have seemingly written off Nokia as the Commodore of the cell phone industry. 

Nokia is not going down without some kind of fight. The company announced September 10 that former Microsoft (Nasdaq: MSFT) executive Stephen Elop will be replacing Olli-Pekka Kallasvuo as the company's CEO. Will Elop turn this ship around, or is it too late to save what used to be one of the largest tech companies in the world? 


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Note: The original version of this stated that Elop is American. He is not (he is Canadian). I would have sworn that I originally wrote "North American", but whether I did or not, it went out as "American". 

Cree Not Burning Out Yet

Judging by the early reaction in the market, LED specialist Cree (Nasdaq:CREE) is going to take a hit in the wake of its fiscal fourth-quarter earnings and forward guidance. At first blush this may look like a case of Wall Street saying that nothing is ever good enough, but a quick glance at the valuation reveals a more typical growth stock profile. This, then, is the tradeoff for investors - the ride up from below $15 in late 2008 to the recent high near $80 was a blast, but with that moves comes extremely aggressive expectations and hair triggers on the sell orders at the first hint of trouble.

The Quarter That Was
Simply put, there just are not very many companies growing like Cree right now. Revenue jumped 79% this quarter to $265 million, with XLamp LED components once again proving to be a strong driver. Impressive as that growth is, it was basically spot-on for what analysts had forecast for the company. Once again, this is a company that is doing great, but where the expectations are so high that a lot of institutional investors are going to turn around and ask "what else ya got?"


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Maybe Atmel Beats The Cycle

I realize the news is already long out on Atmel's (Nasdaq: ATML) great quarter last week, but this is a story that still seems worth talking about to me. After all, Atmel was one of the first stocks I ever bought (part of an initial group of 3), so it has a certain amount of sentimentality to me.

By pretty much any reasonable standard, the second quarter was a success for this long-struggling chip company. Revenue exceed expectations by a pretty hefty margin, as the company saw sequential growth of 13% and annual growth of 38% (for what its worth, the expectations on the top line growth were in the mid/high single digits).

Atmel also managed to be more profitable this quarter, as gross margin hit 41% - building on the first quarter's 38%. It looks, then, as though Atmel's four-year restructuring effort is finally starting to show real benefits.

At the bottom line, the company did okay. I know that the "official" numbers make it look like a big beat, but I think those figures are a little deceptive. It was not a bad quarter ... just not as good as the initial breathless media reports made it appear to be.

So, what is driving the bus for Atmel? The company's microcontroller business - arguably the most desirable prize from back in 2008 when ON Semiconductor (Nasdaq: ONNN) and Microchip Technology (Nasdaq: MCHP) were attempting to acquire and slice-and-dice the company. In particular, the company's maXTouch product is really starting to get some traction in the touchscreen market - it is part of the new Motorola (NYSE: MOT) Droid X, the Samsung Galaxy S, and HTC Evo 4. I am also reasonably sure that it is going into some Nokia (NYSE: NOK) phones as well.

Even though things are going well for Atmel, I would be careful about chasing this one today. Sure, the maXTouch seems to be doing really well and sometimes an individual product cycle can be enough to carry the day. I am worried, though, that there has been a lot of channel-stuffing (or at least inventory-rebuilding) this past quarter and that might really put the breaks on the chip sector in the second half of the year. Overall, it just seems like things are closer to "cooling off" than "heating up" for the broader economy and I would be nervous holding a stock like ATML in that environment - even though I do think the company is well on the road to recovery.