Seeking Alpha: Lenovo Looking To Have The Last Seat When The Music Stops

It's easy to dismiss Lenovo (OTCPK:LNVGY) right now. What sane management team would want to be in the PC business when shipments are declining at a double-digit rate? What sane management company would want to battle high-end smartphone champion Apple (NASDAQ:AAPL) and low-end dynamo Xaomi with the rusty blade that is Motorola at their side? Why would anybody think there's money to be made in a server business that IBM (NYSE:IBM) didn't want?

What I think many of the superficial analyses of Lenovo miss is that this is a company with a proven ability to squeeze blood from a stone and relentlessly drive costs lower. While PCs are likely never going to be a growth market again, I do think there's still an opportunity for Lenovo to gain share and take what growth is there. Likewise, I don't think Lenovo ever unseats Apple in smartphones, but I believe Lenovo's cost structure can allow it to be one of the last companies standing after the industry shakes out the weaker players. Finally, I think there's meaningful server growth opportunity in China and other emerging markets, and here too I believe Lenovo has an opportunity to benefit from stripping costs out of the IBM assets and running the business more cost-effectively.

I've decided to take a more negative view of Lenovo's revenue growth prospects, as the decline in PC shipments has been exceeding my expectations from a year ago and the smartphone market too has cooled more quickly than I expected. Nevertheless, even with a lower revenue growth rate, the opportunity to add around a point and a half to operating margin over time and a similar amount to FCF margin supports a fair value above $28.

Lenovo has to achieve its cost-reduction goals for the Motorola business on schedule to rebuild investor/analyst trust, but I believe Lenovo has seen the bottom in mobile and servers and will surprise with what it does over the next three to five years. More importantly, I think Lenovo has a cost structure and a cost philosophy that makes it a long-term survivor - as virtually every market eventually becomes a commodity market over time, cost leadership is ultimately what distinguishes the survivors and I believe Lenovo has the corporate DNA to be the last (or at least one of the last) players standing in PCs, x86 servers, and phones.

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Lenovo Looking To Have The Last Seat When The Music Stops

Seeking Alpha: Taiwan Semi Running Hard ... But Is The Track A Treadmill?

Although I think the "picks and shovels" concept is often overplayed as an investment philosophy, it's hard to argue that it doesn't have a place in certain industries. If you map the performance of semiconductor foundry operator Taiwan Semiconductor (NYSE:TSM) (or "TSMC") against the ten largest semiconductor companies (excluding Intel (NASDAQ:INTC)) over the last five years, only Avago (NASDAQ:AVGO), NXP (NASDAQ:NXPI), and Skyworks (NASDAQ:SWKS) have outperformed TSMC. At a minimum, then, I would argue that makes TSMC a valid idea for investors to consider when thinking about adding exposure to that sector.

As an investor who is here to make money, I find the debates over TSMC to be pretty interesting. Sell-side analysts do battle every month with what their "sources" claim is going on with major customers like Qualcomm (NASDAQ:QCOM) and Apple (NASDAQ:AAPL), while likewise speculating as to the timelines and performance characters of next-gen processes at rival fabs like Intel and Samsung.

At the heart of it all, though, I do have some concerns about the growth outlook for TSMC. The company has shown some cracks (from a competitive standpoint) at the 14nm/16nm node that didn't appear at 20nm, 28nm, and 40nm, and Intel and Samsung aren't going to let up. While the company has proprietary technologies that bulls believe can build/hold share, the race to 10nm is key to sentiment. Given my concerns about overall market growth, though, it's hard for me to find a lot of reasons to make this a core holding today.

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Taiwan Semi Running Hard ... But Is The Track A Treadmill?

Seeking Alpha: Lenovo Facing Headwinds, But Managing Them Well

The core markets that Lenovo (OTCPK:LNVGY) serves haven't been in the greatest of health lately. PC sales continue to fall, and smartphone sales in China and large emerging markets have weakened. Despite that, the company continues to focus on building share and refining a lean model that keeps constant pressure on its rivals.

The key priorities for Lenovo's management need to be the improvements of the server business (acquired from IBM (NYSE:IBM)) and the mobile business acquired from Google (NASDAQ:GOOG). Both can support the company's basic functional value philosophy, but both need their cost structures further "Lenovo-fied". I continue to be bullish on the company's prospects for achieving these endpoints, but the shares aren't an obvious bargain today.

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Lenovo Facing Headwinds, But Managing Them Well

Seeking Alpha: Lenovo's Strong Operating Results Likely Won't Quiet The Doubters Yet

I expect that for any sufficiently large company, there will inevitably be analysts and investors who are negative on the stock. In the case of Lenovo (OTCPK:LNVGY), though, I continue to be surprised at the conviction expressed by the bears that Lenovo will fail to successfully integrate and improve the x86 server business it acquired from IBM (NYSE:IBM) and the Motorola phone operations it acquired from Google (NASDAQ:GOOG) (NASDAQ:GOOGL) and somehow lose its touch in the PC business along the way.

Skepticism is fine; healthy, even. In the case of Lenovo, I think it also points to an ongoing opportunity for the shares to perform. I believe that Lenovo can continue to leverage its leading position in PCs and use its extensive operating leverage to reduce costs in the IBM server business. I'm less certain that Lenovo can break out from the pack and become a #3 smartphone player with enough leverage to seriously threaten Samsung (OTC:SSNLF) or Apple (NASDAQ:AAPL), but I nevertheless do believe that the company's mobile operations are a long-term growth opportunity.

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Lenovo's Strong Operating Results Likely Won't Quiet The Doubters Yet

Seeking Alpha: Is This A 'Buy The Dip' Opportunity At Maxim Integrated Products?

With a very disappointing outlook for the next quarter and renewed worries about Maxim Integrated Products' (NASDAQ:MXIM) ability, or lack thereof, Maxim shares are off significantly amidst some broader renewed worries about the chip sector. This may be one of those "buy the dip" opportunities that investors are always supposed to be looking or waiting for, but the outlook is admittedly a reason to pause. That's the problem with "buy the dip" opportunities - stocks rarely sell off because they're forgotten or a sloppy block sale pushes down the price; usually something pretty scary is going on in the underlying business.

The sell-off here does look too steep, but I'm not in a rush to add this to the top of my buy list. When I last wrote about Maxim, I cited some concerns that the company may not diversify away from Samsung as quickly or successfully as hoped, and that may be coming home to roost. Still, value is value, and unless the outlook at Maxim really crumbles over the next six to 12 months, these shares look 10% or more undervalued.

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Is This A 'Buy The Dip' Opportunity At Maxim Integrated Products?

Seeking Alpha: FormFactor Coming Into Shape

In early December of 2013 I wrote that FormFactor (FORM) looked like an appealing risk-reward trade for more aggressive investors, as the market seemed to be very down on the prospects for the company to grow its SoC probe card business and improve its margins. Since then, the shares are up over 50%, with a big run over the past few weeks driven by improved guidance for the second quarter. There remain valid ongoing concerns as to whether FormFactor can improve margins enough to generate attractive long-term cash flow streams, but technology transitions in memory and logic could make the next couple of years very interesting for FormFactor.

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FormFactor Coming Into Shape

Seeking Alpha: Taiwan Semiconductor Keeps Building For The Next Act

If Glengarry Glen Ross gave us the motto of "always be closing", maybe Taiwan Semiconductor (or "TSMC") (TSM) can be said to follow a motto of "always be changing". TSMC not only has to stay at the edge in terms of process nodes, it has to keep pace with the volume needs and demands of its client base. This year will mark the fifth straight year of well above-average capital spending, as TSMC looks to keep its position as a leader foundry provider to communication chip designers and compete with Intel (INTC), Samsung, GlobalFoundries ("GloFo"), and United Microelectronics (UMC) in the emerging 10/nm14nm/16nm FinFET (or "FF") nodes.

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Taiwan Semiconductor Keeps Building For The Next Act

The Motley Fool: Lenovo Group Ltd: Taking Short-Term Pain For Long-Term Gain

Chinese PC, smartphone, and tablet manufacturer Lenovo (NASDAQOTH: LNVGY  ) has a knack for surprising analysts and investors that goes back a while. Lenovo defied skeptics who thought its acquisition of the IBM (NYSE: IBM  ) PC business was a losing move, leveraging that deal to build the world's largest PC business and continuing to grow its PC business at a time when the market is shrinking.

Now Lenovo is doubling down in a big way. The company's acquisition of IBM's server business was well-telegraphed and well-liked, but then the company shocked the market with the nearly $3 billion acquisition of Motorola Mobility from Google (NASDAQ: GOOG  ) . The latter has proven quite controversial, with some sell-side analysts speculating that Lenovo will never turn Motorola around and the shares down around a quarter since the announcement.

I believe that the near-term skepticism ignores the substantial long-term opportunities at Lenovo and some significant undervaluation in these shares.

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Lenovo Group Ltd: Taking Short-Term Pain For Long-Term Gain

Seeking Alpha: Waiting For Ultratech, Or Waiting For Godot?

The difficult wait at Ultratech (UTEK) goes on, as investors are growing restless with the lack of much-needed laser spike annealing orders. While I still believe that Ultratech has very competitive technology in this market and that LSA is going to be vital to sub-20nm chip production, that belief is being tested in the face of poor ordering results. In the meantime, growth in the advanced packaging, metrology, and ALD is nice to see, but not enough to drive the stock.

Recreating the company's past market share in LSA in this next generation of chips would still make this a stock very much worth owning. I would also point out that the company has nearly $10 a share in cash on the balance sheet on a fully-diluted basis. It must be said, though, that Ultratech is getting very close to that "put up or shut up" point where talking about technology and revenue potential feels pointless in the face of relative performance data from Applied Materials (AMAT), Dainippon Screen (OTC:DINRY), and perhaps Mattson (MTSN).

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Waiting For Ultratech, Or Waiting For Godot?

Investopedia: Another Beat And Raise Highlights Avago's Quality

One of the more common questions I get is “If you like 'X' so much, why don't you own it?” Sometimes the answer comes down to not wanting to sell stocks to raise cash, and sometimes it's a question of timing or portfolio allocation. In the case of Avago (Nasdaq:AVGO), a semiconductor stock I've liked for a little while now, it's a little bit of “all of the above”. In particular, though, the general malaise in anything tied to wireless had me cautious, as well as the company's high reliance on China for industrial segment growth.

As it turns out, I needn't have worried. Avago delivered another beat-and-raise quarter, which I argue once again highlights that the company's chips offer pretty compelling advantages that allow for market share gains even amidst challenging end-market conditions. Writing this in the pre-market hours, I don't know if the indicated gains will hold in the market, but while the stock is not the cheapest name around anymore, I think there's enough momentum and quality to the name to lean towards “benefit of the doubt” on value.

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Investopedia: Plenty Left To Do, But Signs Of Progress At Best Buy

I know that the skeptics on Best Buy (NYSE:BBY) are going to look at Tuesday's results and ask “What recovery?” After all, comps are still declining and gross margins are still down on a year-over-year basis. What's more, the apparent erosion in high-end mobile demand is a sizable threat to a company that gets a lot of revenue from mobile devices. On the other hand, nobody should have believed that Rome would be rebuilt in a day, and Best Buy continues to deliver on multiple points of its recovery plan.

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Seeking Alpha: Atmel Needs To Show That Touch Can Be A Growth Business Again

While Atmel (ATML) has looked for touch controllers/sensors in mobile devices to build on its core microcontroller business and reignite some growth, that plan hasn't exactly gone to plan. Atmel has done a good job of developing new technologies like maXTouch, but the company has not yet broken out of a cycle where the higher-end touch companies like Atmel, Synaptics (SYNA) and Cypress (CY) play leapfrog with each other on each new device iteration (gaining and losing sockets) before eventually seeing lower-ASP rivals catch up.

At the same time, the underlying recovery for non-touch microcontrollers has been a touch-and-go affair in end markets like industrial, wireless, consumer devices and so on. While Atmel continues to offer leverage to both a more general chip demand recovery as well as company-specific drivers like improved margins and acceptance of its new XSense technology, the slowdown in high-end handsets and the very slow adoption of touch-enabled laptops/notebook computers still make this a challenging investment thesis.

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Atmel Needs To Show That Touch Can Be A Growth Business Again

Seeking Alpha: Forget The Temporary Worries, Lenovo Built To Continue Winning

Every time a new consumer tech gadget comes out, it seems like investors forget a simple a rule - sooner or later, everything becomes a commodity and success comes down to who can design, build, and ship at the most appealing cost structures. That's something that Lenovo (LNVGY.PK) has quite a bit of experience with, as it has used internal execution and significant acquisitions to become the world's #1 PC vendor and the #3 handset company.

I don't see any reason to believe that Lenovo is done. The company has started to build its server business, and may ultimately strike a deal with IBM (IBM) that would vault it into the #3 slot almost overnight. Likewise, the company is looking to take its growing mobile device business into the U.S. in 2014, and Lenovo's past success in the PC business suggests that investors shouldn't ignore the potential there.

There are risks that the Chinese PC market leads to some noise in the shares over the next quarter or two, but waiting for that to settle down could mean missing a few points in the stock. With long-term appreciation potential of more than 30% to 60%, Lenovo looks like a good play on emerging markets consumer and business spending.

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Forget The Temporary Worries, Lenovo Built To Continue Winning

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: Reports Of TSMC's Imminent Demise May Be Greatly Exaggerated

There's really no such thing as “steady state” in the semiconductor industry, and fab operator Taiwan Semiconductor (NYSE:TSM) (aka “TSMC”) has the need to always stay on the leading edge of what its customers need and want in terms of chip manufacturing technology/capabilities. In addition to that constant pressure of migrating to the next generation, TSMC is facing the entrance of a major potential rival – Intel (Nasdaq:INTC).

While I think Intel's technological capabilities are not to be underestimated, the assumption that TSMC is in serious trouble seems misplaced. That isn't necessarily to say that the shares are cheap right now, but I see TSMC as a share-gainer in the fab space for the foreseeable future.

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Investopedia: BlackBerry Still Doesn't Get It

There's maybe no better example of the disconnect between the real world and the stock market than the near-tripling of BlackBerry's (Nasdaq:BBRY) stock price from the September lows of 2012 to the February highs of this year. This is a company that still doesn't appear to know how to handle investor relations, nor actually listen to what customers want and design their devices accordingly. The company's sizable cash balance gives management many additional bites at the cherry, but it's hard for me to see a reason to believe they'll execute on the turnaround opportunities in front of them.

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Investopedia: The Craziness Is Well Underway Again At Micron

As someone who has almost always had a semiconductor stock in his portfolio, I can tell you that you have to a have a loose screw or two to like this sector. But the memory chip space is a completely different wing of the semiconductor asylum, one where the peak-to-trough cyclicality is truly impressive and where long-term economic returns are difficult to earn.

That has led to a pretty “challenged” existence for Micron (NYSE:MU), and a stock that has been all over the map. With the industry consolidating down to just four major suppliers, though, the thought now is that the players will operate on a more rational basis and allow each other to actually book some respectable earnings and cash flow. While I think Micron's shares have room left to run on investor enthusiasm, it's tough to outline a fundamental case where the stock is significantly undervalued for the long term.

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Investopedia: The Bar Is Rising For Atmel Again

Unless your name is Qualcomm (Nasdaq:QCOM), serving the wireless device market is a tricky proposition, as constant ASP erosion is a fact of life and the prospect of losing sockets always looms. Investors in Atmel (Nasdaq:ATML) have seen that firsthand, as this large microcontroller company has suffered from competitive socket losses and market shifts toward cheaper alternatives. With new product opportunities on the way and the prospect of improving operating leverage, though, these shares have started to recover. The question for investors is whether the company can deliver even more upside than these improving expectations incorporate.

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Investopedia: Will Chatter Around Samsung Shipments Spook Components Stocks?

One of the favorite games of sell side analysts covering the smartphone/mobile device sector is “Guess That Shipment Number”; using various channel checks and supplier interviews to project shipment numbers for phones from leading manufacturers like Apple (Nasdaq:AAPL) and Samsung Electronics (Nasdaq:SSNLF) and go to the buy-side with supposedly proprietary calls. This time it's Samsung's turn, and analyst downgrades tied to flagging sales of the Galaxy S4 have sent the stock down more than 6% in South Korea.

As Samsung Electronics trades only as an unsponsored ADR in the U.S. (and an illiquid one at that), the impact to stocks like Apple, Nokia (NYSE:NOK), and the component suppliers may be the more relevant factor to consider. While it would be very hasty to call these lower shipments (if the stories are true) the end of Samsung's smartphone boom, it's a good reminder that over-booking and product launch cycles introduce a lot of uncertainty into this sector.

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Investopedia: Lenovo Still Far From Getting Its Due

Every investor knows that China has seen a significant economic slowdown over the past year or so. Likewise, the ongoing struggles of the PC market (and, to a much lesser extent, the high-end smartphone market), have been amply reported in the financial press. As a manufacturer of predominantly PCs with a major portion of business coming from China, that would seem to spell bad things for Lenovo (OTC:LNVGY). While it's true that growth did slow noticeably in the fourth quarter, I continue to believe that Lenovo is significantly underestimated and undervalued by the market.

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