Friday, August 04, 2006

Notablecalls - Paperstand

According to The Wall Street Journal, managers of "value" mutual funds can be a finicky bunch when it comes to investing, because their goal is to buy stocks on the cheap. A year ago, many were sitting on record piles of cash and saying that stocks were overvalued. Now, they appear to be diving back in. In recent months, some value-fund managers have started pouring cash back into the mkt. For individual investors, it marks an important shift because it suggests that at least some investment pros think they are starting to spot decent prices. Value funds are particularly worth watching because in recent years they have enjoyed a healthy winning streak, mostly topping "growth" funds for the one-, three- and five-year avg annual periods.

The WSJ's "Heard on the Street" column discusses Ford (F), saying that the chatter in the financial mkts is that selling struggling luxury brands like Jaguar or a piece of its credit unit might be job one in Ford's soon-to-be remodeled "Way Forward" turnaround plan. This week the co tapped Kenneth Leet, a longtime investment banker, to explore possible asset sales and alliances. A spokeswoman says the co "has no imminent plans" for any divestitures or alliances. But Mr. Leet's presence is generating speculation among investors and industry observers that one or more of the co's European premium brands, Land Rover, Volvo, Aston Martin and Jaguar, could be shopped. At the same time, there are rumblings that selling a portion of the co's healthier Ford Motor Credit could yield more proceeds. Either step, while not easy, could be crucial to Ford's effort to exit from its worst businesses and mend its core N-American operations. Like rival General Motors (GM), Ford is facing a combination of steep employee-benefit bills, sagging mkt share, rising borrowing costs and disappointing financial results. "They're in a tough spot," says John Novak, an auto-stock analyst with Morningstar who advises investors to consider buying Ford shares, if they fall to $4.70. "Selling brands or part of Ford Credit is something they should consider."

Barron's Online discusses flash memory sector, saying that flash memory chips have gained in popularity with the rise of digital music players. The technology is increasingly used to store pictures in digital cameras. Flash memory combines the best features of HDDs and the DRAM chips used for a PC's main memory. Like a HDD, flash memory retains information when the power to a computer is turned off, but like DRAM, it can be as much as 50 times as fast as disks. Sales of the kind of flash memory chips used in the iPod should grow 16% this year, to $12.3bn, faster than expected overall chip sales growth of 10% globally, according to IC Insights. But it's quite possible the next 6 months will see a business tsunami of sorts, a rising tide of memory chip inventories that will depress prices and hurt memory chip manufacturers such as Samsung Electronics, Micron (MU), and tool makers that sell to them, such as Lam Research (LRCX). Flash chip makers have been rapidly adding manufacturing capacity. At the end of the day, flash is a commodity, just like all memory technologies, and oversupply can crush prices and profitability. There may be a small bright spot in co's with design innovations that give them some pricing power, such as SanDisk (SNDK). But the rush by competitors to win the business of Apple and others may well leave too many chips on hand, echoing an inventory correction that damaged chip makers in late '04. "If you're pushing all this product out of these chip factories into the mkt, it's like a wave," says Tim Arcuri, of Citigroup, describing the rising tide of inventories across the chip business. "If it gets bought, there's no problem, but if it hits a wall, it will reverberate back upon you in 6 months' time."

Barron's Online reports that insider buying at Goodman Global (GGL) has been heating up, even as investor enthusiasm has cooled off significantly since the heating, ventilation and air-conditioning unit-maker went public in April. On July 31 and Aug. 1, 10 Goodman execs, including the co's CEO and CFO, spent a total of $2m to buy 162K shares.

The DigiTimes held interview with SigmaTel (SGTL) CEO Ron Edgerton. Mr Edgerton told that "I think that our printer solutions will do well in the 2H06, progressively increasing their contribution to SigmaTel's business. Digital-camera solutions also have a good perspective, but it will be a little bit longer before they begin generating high sales. Their time will likely come in the 1H07. In fact, we are now transferring some technologies from the digital-camera project and putting them into our core MP3 product. We think that our next-generation multimedia chip will incorporate some image processing technologies, such as color-space conversion and compression, as a way of ensuring video quality." CEO also stated that the co does not sell anything directly to Apple (AAPL). However the co sells to Asustek and Asustek uses SigmaTel products (STMP3550 chip) in iPod Shuffles. Asustek currently contributes about 10% of SigmaTel revenues. rest of teh interwiev discusses patents, with CEO saying that "we have over 300 patents filed or issued, and many of them were filed 2-3 years ago. As you may know, it takes about 2-3 years in the US for a patent to be processed by the patent office, so every qrtr, we issue a significant number of patents. That makes it more and more difficult for our competitors to design products around our patents." "Additionally, we acquired a set of original MP3 patents known as the Moon-Hwang patents, and we think they help to reinforce our pioneering position in the MP3 mkt. These patents are actually system-level patents, and we believe that they cover all MP3 players manufactured in China. This helps us to protect our investments in this business."

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