Investopedia: Marvell Unloved, But Does That Mean Undervalued?

It's hardly news to say that Wall Street plays favorites and in doing so sometimes goes well past the bounds of reality with respect to a company's real underlying value. For every ARM Holdings (Nasdaq:ARMH) or Analog Devices (NYSE:ADI), there seems to be at least one undervalued company. The question for shareholders is whether Marvell (Nasdaq:MRVL) deserves to be included in that latter group. While the valuation seems quite undemanding, this company still has a ways to go to convince investors that it still has the competitiveness and the business model to drive better long-term results.

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Investopedia: Weak PC Demand Weighs On Seagate

Investing in Seagate (Nasdaq:STX) is at least a little like playing chicken with a freight train. While I don't want to entirely dismiss Seagate's potential to transition into new products, technologies and end markets, the fact remains that its core hard disk drive (HDD) market is facing a one-two punch from increasing solid state drive (SSD) substitutions and a switch from PCs to mobile devices, like smartphones and tablets. Although the HDD business is not going to vanish, investors face the difficult prospect of trying to get both the timing and the magnitude of the decline right, as well as Seagate's ability to generate (and/or reinvest) cash during that decline.

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Investopedia: Western Digital Looks LIke A Trader's Dream

Looking at the two major hard drive companies, I'm reminded of an oft-played Vince Lombardi quote - "What the is going on out there?" It was just a few weeks ago that Seagate (Nasdaq:STX) warned the Street that its performance was going to come up short, and here we have Western Digital (Nasdaq:WDC) blowing away numbers for its fiscal fourth quarter and issuing some pretty bold guidance. One way or another, it looks like these stocks are likely to continue to offer up red meat for those inclined to trade.

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Investopedia: Can Intel Manufacture An Edge?

Companies have been lining up to tell investors how tough the PC market is these days, so there was a little bit of relief when Intel's (Nasdaq:INTC) second quarter numbers were basically on target. The issue for investors, though, is that near-term pressures in the PC market and a relatively unimpressive valuation could well weigh on shares even as the company has an improving long-term outlook.

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Investopedia: Early Returns From Tech Not Looking Good

'Tis the season for companies to issue warnings that calendar second quarter earnings are not going to be up to snuff. With investors already jittery about the outlook for tech stocks, July 5, 2012's warnings from Seagate (Nasdaq:STX) and Informatica (Nasdaq:INFA) are not going to the sector any favors.

Seagate - Yes, It's Still a Cyclical Business
As the hard drive company least damaged by the Thai floods, Seagate has been on something of a roll with its operations. That roll has now noticeably slowed. Whereas the company had once guided to "at least $5 billion" in revenue and gross margin of 34.5%, management warned that actual revenue for the quarter will be more on the order of $4.5 billion, while gross margin will be closer to 33.6%. If there's good news here, it's that analysts were already getting more skeptical and cautious, and had been lowering their numbers. Consequently, the announced miss adds up to less than 10% on the top line and about one point on the gross margin line.

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Investopedia: Seagate - How Much For How Long?

When I last wrote on Seagate (Nasdaq:STX), I said that the huge uncertainties surrounding the hard disk drive market were going to make this an interesting, albeit unpredictable, stock. For most of the last quarter, though, the stock has chopped between $26 and $28 as the bulls and bears battle it out over how quickly hard drive prices will normalize and what normal even means anymore.

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Investopedia: Can Xyratex Change With The Times?

While being positioned as something of a nuts-and-bolts supplier of components to the burgeoning enterprise data storage market might sound like a good thing, Xyratex (Nasdaq:XRTX) is at a very challenging point in its lifecycle. With a major customer potentially moving more and more of their business away from Xyratex, the company needs to start finding new sustainable growth markets.

A Tough First Quarter
Xyratex didn't do much to dispel the worry that its business is facing the risk of substantial erosion in the coming years. Revenue fell 18% this quarter and missed the average sell side estimate by about 7%. In addition, revenue in the enterprise data segment fell 19%, while hard drive capital equipment sales fell 10%.

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Investopedia: Good Or Bad, Seagate Won't Be Boring

Oftentimes it's the case that investors can see which companies are likely to have the most volatile stocks by checking out the range on analyst estimates. The bigger the spread, the more uncertainty and the more potential for positive (or negative) developments. With an enormous range of analyst expectations, a traditionally cyclical industry, and encroaching competition, Seagate (Nasdaq:STX) is not likely to be boring over the next couple of years.

Apres le deluge  
Thailand is home to a variety of electronics manufacturing facilities, and the country was beset by nearly six months of flooding that started in mid-2011. That flooding not only devastated the lives of many Thais, but also had major impacts on the hard drive industry. 

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Investopedia: Is Micron A Call Option On Consumer Electronics?

Once again Micron (Nasdaq:MU) has disappointed investors relative to expectations, but that may not really be all that important anymore. The biggest question is whether the memory space has dug out its trough for this cycle or is about to do so soon. For all of the consumer electronics headwinds, the fact remains that Micron is still one of the stronger players, and demand will rebound eventually. Although Micron is really not a good candidate for buy-and-hold, it may have value as an expiration-free call option on a broader sector recovery. (To learn more, check out Options Basics.)

Do Poor Results Matter?  
Micron posted results that are frankly not very impressive and once again missed average expectations (making it three in a row). Revenue fell 7% from the year-ago level and about 2% from the prior quarter. It wasn't all bad news, though. DRAM revenue was basically flat (as double-digit increases in volume offset double-digit decreases in price), but NAND flash product revenue rose about 6% from the fourth quarter.

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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: A Stumble For NetApp Isn't A Disater

Even a good market, like enterprise storage, isn't completely bulletproof. Investors always try to read between the lines of the releases from IBM (NYSE:IBM), Dell (Nasdaq:DELL), EMC (NYSE:EMC) and Hewlett-Packard (NYSE:HPQ), and try to figure out the "real" story on the enterprise market. And, then, there are the occasional outlier events, like the recent flooding in Thailand that stir up the market. All of that said, slightly disappointing guidance from NetApp (Nasdaq:NTAP) shouldn't completely sour investors on this name; it is not as strong of a prospect as EMC, but the price on these shares is nevertheless interesting. (For more on the tech industry, read A Primer On Investing In The Tech Industry.)

A Mediocre Second Quarter  
For its fiscal second quarter, NetApp reported about 20% revenue growth, missing the average analyst' guess but only slightly. Organic revenue growth was much more modest, though, and something in the low single-digit range (3 or 4%). Product revenue rose 23%, as reported (and up 5% sequentially) on strong year-on-year shipment growth in midrange products. Although NetApp had some issues with specific large customers, demand from the likes of Dell and Teradata (NYSE:TDC) was encouraging.

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Investopedia: Is The PC Back From The Dead?

Horror movies have a lot to teach us. That noise is never "just the cat," it's a bad idea to go into the woods at night wearing only underwear, and tape recordings of demonic incantations tend to spoil a weekend in the woods. But perhaps most important is this lesson - nothing is ever truly dead so long as someone can figure out how to make money from it. 

To that end, perhaps the death of the PC has been exaggerated. With encouraging results from Best Buy (NYSE:BBY) and stronger than expected guidance from Hutchinson Technology (Nasdaq:HTCH) - a manufacturer of suspension assemblies for hard-disk drives - it seems like their may be life yet in the market for desktops and laptops.

Best Buy's Earnings - Maybe Not So Good for PCs  
Best Buy certainly had a good quarter, and the market responded accordingly. Whether it was great news for the PC market, though, is not so clear. There is no question that sales growth from computing and mobile phones was the leader for the company, but the problem lies in the details. Mobile phones from HTC, Motorola (NYSE:MMI) and the like continue to be hot sellers, as do tablets from Samsung, Research In Motion (Nasdaq:RIMM) and so on. Unfortunately, then, while Best Buy management's indicated that notebook sales had improved, they aren't necessarily strong. 


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Investopedia: Overreaction May Make Tech Data Worth A Look

When a company operates in an industry with razor-thin margins, even the slightest disappointment can send investors into full flight. That, and a jumpy market to begin with, would seem like the best explanation for why Tech Data (Nasdaq:TECD) shares were punished so severely for what was not exactly a disastrous quarter. Although investors should approach this name with caution, value is value, and Tech Data may be worth a look.

First-Quarter Results - Europe Looking Soft
Tech Data reported that revenue rose 13% for the fiscal first quarter (and fell about 11% on a sequential basis). That missed the average estimate of $6.4 billion, and it seems as though analysts and institutions were particularly concerned about soft European consumer demand. Revenue from Europe rose 14% (in euros) from last year's level (and 18% in dollars), but it fell 18% on a sequential basis and looked to be weaker than expected by 2-4%. Business in the Americas was likewise better on a year-over-year basis (up 6%), but weaker than analysts had forecast.


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Investopedia: ON Semiconductor Getting Bigger And Better

Even investors who don't know a MOSFET from a Muppet should give some thought to attractively priced semiconductor stocks. It's true that it is an absurdly cyclical market and there is rampant competition, but these are also consummate second-chance stocks; investors often get multiple opportunities to invest in solid growers at reasonable valuations.

With that in mind, now may be a good time to consider ON Semiconductor (Nasdaq:ONNN). Although the recent weakness in the tech sector has not really impacted this stock (it's hardly down relative to its 52-week high), there is a lot of potential here as the company looks to move up the value chain with its customers.


First Quarter Results - Less Bad Is Good Enough
As has been the case for most chip stocks, no one was really expecting a strong quarter from ON Semiconductor, so "less bad" is good enough. Reported revenue rose 58% from last year and 50% from the December quarter as the company included the results of its Sanyo acquisition. Although pricing was not strong (down slightly on a sequential basis) and lead times are expanding, the impact of the quake in Japan was not as bad as it could have been. (or more, see 5 Hot Semiconductor Stocks.)


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Investopedia: Western Digital Doubles Up On Storage

Consolidation is not uncommon in mature industries, and hard computer disk drives are definitely a mature product nowadays. But even though many pundits believe that flash memory will relegate hard drives to the scrapheap of history, Western Digital (NYSE:WDC) seems to think that day is still a ways off. If you want to make a bet on this company, it'll be up to you to decide whether the company is right about its key product's prospects or not. Let's take a look at some of the data.

Western Digital Buys Global Storage Technologies 

On Monday morning, Western Digital announced that it will acquire Hitachi's (NYSE:HIT) Global Storage Technologies unit for $4.3 billion. Western Digital will pay $3.5 billion in cash (which will be funded at least in part by debt) and 25 million shares. That, in turn, will mean that Hitachi will own approximately 10% of the company. The deal also calls for Western Digital to add two Hitachi reps to its board of directors once the deal closes.

Global Storage Technologies is a relatively small part of a huge enterprise and there is not a wealth of financial data available. That said, Hitachi's HDD business has a revenue run rate right now of about $1.5 billion, so Western Digital is paying a little less than three times sales for the deal.

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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: Double Trouble For Seagate Technology

Even in the best of times, the disk drive business has been fiercely competitive and prone to brutal cyclicality. While Seagate (NYSE:STX) has survived long enough to be a leading player in disk drives, the company's future is still under assault. In the short-term, there are ample worries about whether the PC market will have a decent 2011 and survive the inroads made by alternatives like tablets and phones from Apple (Nasdaq:AAPL), Dell (Nasdaq:DELL), Samsung and Research In Motion (Nasdaq:RIMM). Longer term, there is the question of whether conversion to solid state drives will supplant the core of Seagate's business entirely. 

The Quarter That WasFor the here and now, Seagate is posting mediocre performance. The company's fiscal second quarter met consensus and was in line with a prior preannouncement. What's more, this cyclical malaise really did not surprise anybody all that much.

Consequently, there is not so much concern that revenue rose 1% sequentially, but fell 10% from last year's level. Gross margin was a bit more of a concern, though, as the performance was relatively feeble (gross margin declined 1,100 basis points from last year's level). Likewise, operating income was weak, falling by 64% on a year-over-year basis.  

All in all, Seagate's performance was hurt not only by a general slowdown in PCs, but a decision not to compete on price in certain markets. As a result, unit volume declined and the company had less operating efficiency. One small bright spot was the company's non-computer business, where there was some volume strength in drives for applications like DVRs and gaming consoles. 

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The Data Storage Gold Rush - Who's Left?

The mad scramble going on today in the data storage market may not be the sort of gold rush that gives us classics like "The Treasure of the Sierra Madre," but it is a gold rush all the same. Shareholders have seen soaring valuations, companies have seen the competitive chess board morph in front of their eyes and outside observers have had plenty to talk about as bids and rumors roil the markets. 

With the recent announcement of a deal between Dell (Nasdaq:DELL) and Compellent (NYSE:CML), it is fair to wonder whether the land grab is close to running its course. There is no doubt that storage is going to be a key component of corporate IT as long as there is IT, but it looks like a combination of scarcity and a need to digest prior deals may eventually calm the market.

The Big Boys
There is no question that there are plenty of options when it comes to corporate-level data storage. EMC (NYSE:EMC) is still a major player in the field, along with competitors like NetApp (Nasdaq:NTAP), IBM (NYSE:IBM), Hewlett-Packard (NYSE:HPQ), Dell  and Hitachi (NYSE:HIT). Within this wide array of vendors is an equally wide array of approaches and technologies, ranging from EMC's efforts to meet almost any conceivable storage need to NetApp's much more focused approach.


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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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Is Carlyle Looking At The Next Fiber Gold Rush?

Private equity has certainly been waking up to tech lately (including the recent discussions about disk drive maker Seagate (NYSE:SGX), so perhaps Carlyle's interest in cable and wireless equipment maker CommScope (NYSE:CTV) is nothing more than an opportunistic deal. Thinking about the bigger picture, maybe Carlyle is looking for a second gold rush in the cable and fiber markets. 

The Deal That Might Be
At this point there is no official deal, but CommScope has confirmed that there are discussions. According to a Bloomberg report, Carlyle would possibly offer $31.50 per share in cash - a deal that would be a decent one-third premium to CommScope's closing price on Friday. Interestingly enough, though, not only is that price not all that rich on a valuation basis, but it does not even match the company's 52-week high. (For related reading, check out Private Equity A Trendsetter For Stocks.)

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