Archive: Sprint Nextel (S)

Apologies and a Big Announcement

I originally posted this on April 30, but had to rebuild the site after encountering some problems. Reprinted here.

Readers who have been trying to access the site over the last couple of days, I apologize. There’s no telling what you might have been able to access, if you were able to access anything at all. Blame it on a flubbed software “upgrade.”

It’s a shame, too, because it had to happen just when there was an exciting announcement to make that is probably driving more visitors to the site.

You may recall that when I reviewed the Newsflashr service I said the feeds available are currently limited to a selection (admittedly a large one) of the top sources. While these are indeed the sources I most frequently consider, there are other sources I would like to be able to add as part of a personalized newsflashr.

I also said that based on what I have seen, I would bet adding those features is simply a matter of time.

Little did I know. As Gal explained in a news release:

We’re introducing two new sections for “Stock Market Beat” & “Techmeme Leaderboard” for new selections of the top business and technology news sources. Thanks to Bill Trent at Stock Market Beat for submitting his list of favorite financial news sources. Bill recently wrote a thorough review of newsflashr where he mentioned that he would like to see an option to get a personalized page and, by coincidence, we had just completed our work on this feature. So here’s our new way of viewing Bill’s OPML reading list:

Feeds view: http://www.newsflashr.com/feeds/stockmarketbeat.html
Topics view: http://www.newsflashr.com/topics/stockmarketbeat.html

Now you can sift through my news sources to see where I’m coming up with some of my crazy ideas.

In the meantime, I’ll be trying to restore my site to its previous condition.

Topics: Communications Services, Computer Hardware, Dell (DELL), Radio Shack (RSH), Retail (Technology), Sprint Nextel (S) | No Comments

RSH: Is RadioShack Finally Worth Buying?

This article is a reprint of my March 10, 2008 RealMoney column

  • I don’t expect RadioShack to grow.
  • But it should be worth buying as long as they can limit their cash flow declines to 5% or so annually.
  • Combined with a put-write strategy, it looks even better.

RadioShack (RSH) is a company investors love to hate, and it isn’t hard to see why. Stocked full of stuff you occasionally need but often find elsewhere, it represents the unsexy part of consumer technology – wires, batteries and cables that you forgot to pick up when you got the HDTV or game console at your local Circuit City (CC) or (more likely) Best Buy (BBY).

What’s more, RadioShack’s 4,400-odd company-owned stores, on average, sold 6.7% less stuff in the fourth quarter of 2007 than they did in 2006. This is an improvement from the full-year same-store decline of 8.2%, which is partly attributable to the fact that 525 stores have been closed since year-end 2005. Many of these, presumably, were the worst-performing ones. Having fewer of the really bad ones open for the last 12 months will contribute to improving same-store figures.

Now that the low-hanging fruit has been picked, investors need to figure out whether what remains is worth climbing what could be a rickety ladder. Most investors tend to shy away from companies that aren’t growing, and generally flee from those that are shrinking. Still, even shrinking companies are worth something, and investors can be rewarded if they pay the right price.

The valuation is certainly cheap, at ten or eleven times earnings. My preferred measure, the free cash flow yield, is a downright juicy 14.3%. With that kind of cash flow yield, RSH could generate double-digit returns even if cash flow declined 4.3% per year. With five-year Treasuries yielding just 2.5% the declines could be even larger and still earn investors the typical risk premium that would be expected for holding stocks.

With the question thus changed from whether RadioShack can ever grow again, to how much shrinkage is currently priced in, the analysis becomes a bit less sticky. For this, I think I’d accept a return in line with that of RadioShack debt – which reflects the company’s relative risk and allows for a modest premium based on the more favorable tax treatment of equity returns.

RadioShack’s May 2011 note is currently yielding about 7%. To generate equity returns higher than this, RadioShack will have to limit its free cash flow declines to 8% per year – in other words, they can’t get any worse.

RadioShack attributed the same-store sales weakness in 2007 to “a decline in postpaid wireless sales for our two main wireless carriers.” Wireless sales account for a third of RadioShack’s business and those two carriers are Sprint (S - Annual Report) and AT&T (T - Annual Report). Sprint’s performance has been pathetic, while AT&T is relatively weak in the Northeast, particularly RadioShack’s largest market – New York City. The contracts with AT&T and Sprint don’t expire until 2015 or later, so there isn’t much hope for a carrier shake-up. On the other hand, Sprint is now so bad that incremental further declines may cease to register.

Investors seem to be picking up on the potential value, as the rally following the latest earnings report has given the shares some fragile support. Given the state of the economy and particularly RadioShack’s wireless exposure, I think the company will eventually stem the bleeding to within my acceptable range, but probably not this year.

As is often the case, though, I think the doubt can be addressed by using a put-write strategy to enhance returns and further reduce the potential entry point. As I write this, April $15.00 puts are selling for $0.80 – a 5.3% premium on money that is risked for about six weeks. If the stock declines and the options are exercised, the effective entry price would be lowered to $14.20 – a price that would boost the effective free cash flow yield to 17.8% and increase the margin of safety to permit an acceptable return even with annual free cash flow declines of 10%.

That starts to look like a risk worth taking.

Disclosures: William Trent has written put options against the shares of RadioShack (RSH)

Topics: AT&T (T), Best Buy (BBY), Circuit City (CC), Radio Shack (RSH), Retail (Technology), Sprint Nextel (S) | 1 Comment

VZ: Make Money Not Owning Verizon


Creative Commons License photo credit: lucasreddinger

This article is a reprint of my February 22, 2008 RealMoney column

Forget the debate over whether telecom is a buy or sell. Make money being indifferent.

The decisions by Verizon (VZ - Annual Report) and AT&T (T - Annual Report) to offer unlimited wireless plans for $100 has launched a furious debate at RealMoney over whether the move is the right thing or the wrong thing to do. I see both sides of the story, and if anything lean toward the side of the bulls. But while the bulls and bears hash things out, I think investors can make money by being neutral.

To sum up the arguments, on the bearish side Tero Kuittinnen notes that “The AT&T and Verizon growth stories rest largely on their mobile service, and the mobile service growth hinges on mobile data, not voice. Investors are going to be deeply disappointed if Verizon’s mobile data growth keeps cooling down from the still-torrid 53% pace of the fourth quarter of 2007. For Verizon, mobile data revenue still generates just $11 a month out of the overall $51 average revenue per user. The data growth has to continue to run hot, or the overall ARPU will start declining.”

Jim Cramer counters that “the stock can trade back up toward the high $30’s over the coming quarters as the market comes to realize that these wireless price cuts are a savvy move to take market share from Sprint Nextel (S - Annual Report), which appears to be in serious trouble.”

In the short term, I’m making absolutely no forecast about the effects of the wireless pricing cut, the effects of a potential recession, or the stock price. But there are a few facts to consider that explain my lean toward the bull side.

First, this isn’t the first time in recent memory that there has been a competitive telecom environment. Since the 1996 telecom act, everybody from CLECs to independent wireless operators to cable and long distance companies has taken their shots at the big integrated telecom firms. Several of those categories of competitors no longer exist in any meaningful fashion. So, while it’s true that the pricing power in telecom may not remain at the high levels enjoyed of late, a competitive environment is nothing these companies haven’t seen before.

Second, Verizon is going to continue churning out massive amounts of cash. Its operating cash flows have been roughly $20 billion or more each year this century, and even the dual wireless/FIOS buildouts have required no more than $17.5 billion in capital expenditures. The $5.8 billion in free cash flow generated over the last 12 months leaves more than enough to pay the handsome 5.1% dividend yield that has attracted Cramer’s attention.

Finally, Verizon is getting close to massive technical support at $30. The only time this stock has traded with a $2-handle is for a couple of months in 2002 around the trough of the telecom bust.

Still, I promised that investors could make money in this name without being bullish, and those who know me probably realize I am talking about writing options. I just wrote March $32.50 put options for $0.95. If the stock stays above that level, I collect a 2.9% yield in the next month. Given that Treasuries pay less than that for one year, getting it in one month simply by being willing to buy a utility-like cash flow stream seems like easy money to me.

If the stock continues to slide, I’ll get an effective purchase price of $31.55, from which my dividend yield will be 5.5%, taxed at a more efficient rate than the smaller Treasury yield. Alternatively, I could turn right around and write covered calls to reduce my exposure still further. Those who currently own the stock could also consider covered call writing to enhance their yield.

Yet another useful option strategy here relates to Cramer’s plan to scale into Verizon over time, potentially bringing his initial 1,000 shares up to 4,000 or 5,000. Why not write some puts with staggered dates to accomplish that? Again, using the $32.50 puts, the following table shows how this could work.

Scaling Into Verizon by Writing Puts

 

 

Shares Cost Effective Price
Initial buy       1,000       33.88             33.88
March $32.50 puts       1,000       (0.95)             31.55
April $32.50 puts       1,000       (1.55)             30.95
July $32.50 puts       1,000       (2.65)             29.85
October $32.50 puts       1,000       (3.20)             29.30
      5,000             31.11

Sources: Option quotes obtained from Fidelity Investments at time of writing

Assuming all the options get exercised against him, Cramer would achieve an average purchase price of $31.11 per share, scaling in over time at progressively lower effective entry prices. If the stock stays right where it is, or goes up, he collects a total of $8.35 in option premiums for the shares he never buys.

To me, that sounds like a winning strategy.

Disclosures: William Trent has written put options against the shares of Verizon (VZ - Annual Report)

Topics: AT&T (T), Communications Services, Sprint Nextel (S), Verizon (VZ) | No Comments

QCOM: Qualcomm Keeps its Distance

It is hard to write about Qualcomm (QCOM) without some mention of the enemies it has made over the years. The company’s success, as well as the ire of its competitors, has stemmed from its strong patent portfolio – from which it has extracted hefty (some say unfair) royalties.

With the stock down about 20% on the heels of the current dispute, I thought it a timely time to wrap up what some of the interested parties have been saying. I’ll start with Nokia (NOK).

Rick Simonson

And Tim, in terms of the impact on royalties in the quarter, when you look at our WCDMA royalty provisions, it had some positive impact on the gross margin, but there are far many more important drivers for the sequential gross margin improvement in Q2.

The success of the total product portfolio and particularly driven by having very desirable hit products in every part of the range, high end, low end, midrange, a little bit of the slightly moderated price competition that Olli-Pekka just mentioned would be the second thing that I would call out. Our favorable product mix with M and ES growing faster than MP, thirdly. And fourth, the overall good cost management.

In other words, the benefit that we got in the COGS. Those four things far swamp the very small incremental benefit from the gross margin related to our total WCDMA royalty provisions. In other words, we would be writing the exact same story of this quarter without even that small incremental benefit.

Tim Long – Banc of America Securities

So we can assume that provision is lower than what was actually was being paid previous percentage rate but it’s lower than what was being paid previously?

Rick Simonson

Well, again as we talked before, we necessarily have to be somewhere in between there because we feel strongly in our position that the rates under the old agreement with the one party, QUALCOMM are not correct and we wouldn’t be spending the time on this debate if in fact we felt that we were accruing at the same rate. But it is, to repeat as we said before, somewhere in between those two.

(Excerpt from full NOK conference call transcript)

Next up is Broadcom (BRCM - Annual Report).

Finally, as we stated numerous times in the past, we stand ready to negotiate with QUALCOMM or any other market participant to seek a commercial solution as we’ve done today with Verizon.

With respect to Broadcom’s current litigation proceeding against QUALCOMM things are going very well. Our goals remain simple and two-fold. One is to gain proper recognition of the value of our IP, and the second is to achieve a level of competitive playing field.

At this time QUALCOMM has been found to infringe four of our patents, three of them willfully in two different forms. We also have additional patents that have not yet been addressed to trial. Please note that QUALCOMM has either lost or dropped all claims against Broadcom. There has not been any movement in our discussions with QUALCOMM, as it appears that they have bet their future and end customers’ upcoming product launches on their political lobbying skills.

(Excerpt from full BRCM conference call transcript)

The patent issues also affect Qualcomm’s customers such as Sprint Nextel (S - Annual Report).

We continue to explore our options to ensure our customers have the latest handsets. We continue to import handsets with the technology solution designed by Qualcomm. Qualcomm believes this workaround does not fall within the ITC order. We’ve been testing the solution for several months and there are no impacts on the customer experience.

We are also considering a number of other alternative resolutions to this dispute, including encouraging the two parties to reach resolution.

(Excerpt from full S conference call transcript)

As noted above, Verizon (VZ - Annual Report) also uses the technology but has come to a commercial deal with Broadcom. So what does Qualcomm have to say about all this?

Obviously, we are disappointed with the rulings on behalf of Broadcom both in the Santa Ana case and in front of the ITC. We continue to believe that the rulings are wrong and are pursuing all avenues to reverse and to mitigate the effects of these rulings, including working with our partners who may obtain a license from Broadcom. We’ve been unable to come to agreement ourselves with Broadcom because they’ve insisted that a comprehensive settlement includes the ability for it’s customers to obtain royalty free rights through significant portions of our patent portfolio which would have a material impact on our licensing business. This business is funded on R&D and innovations that we have transferred to are approximately 140 licensees. We remain committed to defend our business model and the benefits they provide to wireless industry. Unfortunately given the threat of injunctions against certain of our products, the next few months represent a crucial litigation time-frame and we can’t predict the outcomes at this time….
With respect to the Nokia arbitration, we have now arrived at a process for selecting arbitrators and that process is underway and we expect to have the arbitration panel in place in fairly short order. And then once the panel is in place we think that the procedure will start moving forward, subsequently the panel will set a schedule and of course we will be pushing for a pretty aggressive schedule. I suspect Nokia will be pushing for ‘08 schedule and we won’t know what kind of schedule we get obviously until the arbitrators order, but that would be the next step.

(Excerpt from full QCOM conference call transcript)

Supposedly it was Sun Tzu who counseled “keep your friends close and your enemies closer.” Qualcomm currently seems fairly far from both.

Topics: Broadcom (BRCM), Communications Services, Nokia (NOK), Qualcomm (QCOM), Sprint Nextel (S), Verizon (VZ) | No Comments

The Week Ahead (29 April 2007)

The Economic Calendar has three potentially important events this week:

  • Personal Income and Outlays on Monday (consensus 0.6% income, 0.5% spending)
  • ISM Manufacturing on Tuesday (consensus 51)
  • The Employment Situation on Friday (consensus 100,000 jobs added, 4.5% unemployment)

Earnings season continues in full force.

Monday

Tuesday

  • Plantronics (PLT) – anyone’s guess, though our long position gives away our own guess

Wednesday

  • Cognizant (CTSH) – one of these days the growth will hit a wall, but probably not this day
  • Garmin (GRMN - Annual Report) – shouldn’t need a big surprise to move the stock from this level
  • Itron (ITRI) – risk to estimates in both directions due to Actaris acquisition
  • Sprint (S - Annual Report) – the worst may be over here
  • Symantec (SYMC) – Based on MFE and VDSL should have a big quarter

Thursday

  • Ansys (ANSS) – Dassault beat big, and we like Ansys better
  • QLogic (QLGC) – too risky for our tastes
  • Starbucks (SBUX) – probably no surprise, but risk probably to the downside when they are making this kind of move

Disclosure: Long PLT and ITRI

Disclosure: Author is long Starbucks (SBUX) at time of publication.

Topics: ANSYS (ANSS), Cognizant Technology Solutions (CTSH), Garmin (GRMN), Itron (ITRI), McAfee (MFE), Plantronics (PLT), QLogic (QLGC), Sprint Nextel (S), Starbucks (SBUX), Stock Market, Symantec (SYMC), Verizon (VZ) | 7 Comments

Dial M for Macy’s

In some ways, having a one-letter ticker symbol is considered prestigious – a sign that the company was able to stake an early claim on the stock market real estate. Whether true or not, Federated Department Stores is after one of the few remaining available letters following its planned name change to Macy’s.

M Is Not For Microsoft – Forbes.com

“M” was once thought to be reserved by the New York Stock Exchange for Microsoft (nasdaq: MSFT – news – people ), which is listed on the Nasdaq Composite as “MSFT.”The letter was available, so that made it fair game for Federated, which has traded under the ticker symbol “FD” on the New York Stock Exchange since 1992.

Of the more than 3,100 companies whose stocks trade on the NYSE, the following one-letter symbols are available: G, I, J, L, N, P, U, V, W and Z.

Federated Chief Executive Terry Lundgren made it sound like it’s a positive change in corporate strategy rather than just a sexier, more attractive letter.

“Changing the parent company name to Macy’s Inc.,” Lundgren said in a news release, “while trading our shares under the ‘M’ ticker symbol will make it simple and clear for all investors to understand we are a brand-driven and consumer-oriented company.”

So just how prestigious is the honor? You be the guide as we scroll through the list of existing one-letter tickers. (We promise we are going only by memory – for the CNBC Trivia crowd, have some fun and try to fill in the blanks or catch us out if we are wrong!

A – Agilent

B – ?

C – Citigroup (formerly Chrysler until the Daimler thingy)

D – ?

E – ?

F – Ford

G – Not in use

H – ?

I – Not in use

J – used to be Jackpot, Inc. Were they bought?

K – Kellogg

L – Not in use

M – Soon to be Macy’s

N – Was Inco

O – ?

P – Not in use

Q – Qwest Communications

R – Ryder System

S – Sprint Nextel (used to be Sears)

T – AT&T

U – Not in use

V – Not in use

W – Not in use

X – US Steel
Y – ?
Z – Not in use

So… three telecom companies and a bunch of old line firms. You decide how prestigious it is, and comment below on our shortcomings.

Topics: AT&T (T), Ford Motor (F), Macy's Stores (M), Qwest Communications (Q), Sprint Nextel (S), Stock Market | No Comments

Sprint the Latest Wireless Signal to Get Crossed

Last month, astute observers (defined as those with a pulse) could notice that there were an awful lot of companies in the wireless food chain announcing disappointing results. Last week Motorola joined the club, and yesterday we got news from the third-largest US wireless carrier. Sprint to Cut 5,000 Jobs; Stock Plunges: Financial News – Yahoo! Finance

Sprint Nextel Corp. reported Monday that its cell phone business suffered a net loss of 300,000 monthly subscribers in the fourth quarter and that the struggling wireless company will cut 5,000 jobs.The company’s stock plunged more than 8 percent after the financial update, which included a 2007 outlook shy of many Wall Street forecasts.

Last month we suggested that several high-multiple names might be worth avoiding. None of those stocks has since blown up, but that doesn’t mean they aren’t standing in a mine field.

Topics: AGR, AT&T (T), Alltel (AT), Altera (ALTR), Analog Devices (ADI), Communications Equipment, Communications Services, Cree (CREE), Linear Technology (LLTC), Maxim Integrated Products (MXIM), Motorola (MOT), National Semiconductor (NSM), Nokia (NOK), Palm (PALM), PowerWave Technologies (PWAV), Qualcomm (QCOM), Research in Motion (RIMM), Semiconductor HOLDRS (SMH), Semiconductors, Silicon Laboratories (SLAB), Sprint Nextel (S), Stock Market, Texas Instruments (TXN), UT Starcomm (UTSI), Verizon (VZ), Wireless, Xilinx (XLNX) | No Comments

PPI: Behind the Headlines

As is our custom, we’ll leave the bickering over the headline PPI numbers and their meaning to others. Instead, we present some of the industries that may be seeing better or worse than normal pricing power. (All grey charts courtesy of the Bureau of Labor Statistics.)
First up is corrugated boxes, which are getting more expensive. This is somewhat confusing, as there doesn’t appear to be much demand for them.

corrugatedboxes.gif

The pricing for industrial gases is getting worse (in sharp contrast to the price charts for Air Products (APD) and Praxair (PX).)

industrialgases.gif

pxapd.png

Aluminum is getting more expensive.

aluminum.gif

Prices for industrial valves are rising at the fastest pace ever, which is probably not priced in at Curtiss-Wright (CW - Annual Report).

industrialvalve.gif

Computer prices are declining at a slower pace than normal. On the other hand, how much farther can they decline?

computer.gif

Pricing power for the rails is softening – are the stocks next?

railroad.gif

unp.png

Telephone calls are getting more expensive for the first time since the 1996 Telecom Act.

telecom.gif

So those were the ones that jumped out at us this month.

Topics: AT&T (T), Air Products (APD), Curtiss Wright (CW), Praxair (PX), Sprint Nextel (S), Stock Market, Union Pacific (UNP), Verizon (VZ), YRC Worldwide (YRCW) | 1 Comment

Fear and Greed

Our regular readers know that we have our fears about the state of the semiconductor industry. Since the cliche says that Wall Street is driven by fear and greed, it seems only fitting that our concerns were answered by Andy So of Raw Greed who says:

I once worked for the CIO of GMAM and I fondly remember him repeating his views on technology:

“Technology is a tool and nothing more. Technology is an enabler. Technology in and of itself is not a business. Technology cannot succeed without needed applications.”

The required business formula seems to be Technology + Applications = Probable Success.
We couldn’t agree more with the quote, but when we read it we think more of Pip Coburn’s The Change Function: Why Some Technologies Take Off and Others Crash and Burn. Pip says:

However, a key problem – for starters – is that most potential users of technology products are quite afraid of new technologies. The creators are not afraid, but the users are, and it is the users who matter. SO it seems obvious to creators that this new thing will sell, and then, it doesn’t. Even during the fabulous 90s when nine or 10 technologies finally hit a major commercial inflection, most of the emerging technologies failed to get anything resembling lift off. We have written extensively on 10 failures of the last decade and in no case was technology the problem. All the technologies worked. The engineers indeed developed a cool massive disruptive so-called 10x change in technological capability.

So what went wrong?

Well… we think the implicit thinking – build cool technologies and watch price reduction contribute to generate lift-off for the market – is limited. Creating cool technology is a necessary condition but not sufficient. To consider what is “sufficient” we must bring the user into the equation.

What The Change Framework says is that we only really need to care about what goes on with the users prior to their handing over money for this new thing. Technology demands a change in habits. So… we want to consider why someone would change habits – something I have observed as veeerrrryyyy difficult but that the technology industry implicitly considers rather easy to pull-off.

So… when does a person change a habit?

When the pain from being in a certain state today is greater than the total perceived pain of adopting a solution to today’s pain. If today’s crisis is greater than the total perceived pain of adoption change will occur.

Change = f (user’s crisis v user’s total perceived pain of adoption)

So… let’s suppose [Pip's nephew] Dylan and my 78-year-old Uncle Jerry have precisely the same desire to have their music with them at all times. Then let’s suppose I offer to help them set up an iPod. I first tell them to go get all their CDs cuz they will need to load them on their computer. Dylan scurries off to get his vast collection. Uncle Jerry says no thanks. He is far more terrified of interfacing with a computer than Dylan. Dylan adopts. Uncle Jerry doesn’t. Uncle Jerry’s total perceived pain of adoption is higher.

In most cases, incidentally, we see price as being less than 10% of the total perceived pain of adoption although folks in the technology world have it burned into their brains that if it is a good idea, all the hold up will be about cost. But, we have been reminded that there is no low enough price for an ugly shirt.

Andy So’s equation leaves users out of the picture, which doesn’t seem to us to be a really logical way of anticipating technology adoption. So what does he suggest will drive technology growth?

We can look at what lead up to the most recent inventory glut in the semiconductor industry and extrapolate which applications are aging. Standard definition DVD, standard definition TV’s, 2G mobile phones, portable audio players and Microsoft Corporation’s (MSFT) Windows XP associated computer hardware lead the inventory glut in consumer applications. In the business world we saw networking, security, Windows 2000 and Windows XP server and workstation platforms as the leading applications. New semiconductor processes and technologies were created for an aging consumer and business application cycle. These aging applications are experiencing ongoing declining profit margins and demand. Currently we are on the verge of a new application cycle that will undoubtedly refresh both profit margins and demand.

There is very little problem with demand, and we apologize if we ever left anyone with that notion. Demand for semiconductors has been growing at just under 6% annually for the last ten years. This implies far greater than 6% unit growth due to the inevitable price declines technology brings. Our problem is that the 6% growth in demand is being met by 70% growth in supply.

Furthermore, look at the list of aging applications and compare it to the replacements: more of the same. Standard def to high def is an incremental rather than a revolutionary change. So is 2G to 3G mobile or Windows Vista. None of these are the kind of “killer app” that the original spreadsheets and DVD players or the Internet were. Will people buy them? Sure. Will they change the world and usher in a new era of technology wonderfulness? Unlikely. (Note: we have said that if anything will drive a new tech cycle it is Vista.)

Consider, for example, the move to high-def. There is no doubt that the world loves its TV and DVDs. There are also many shows that many people would like to see in high-def. So when it is time to buy a new TV and DVD player, most people will probably buy high-def. But so far, it appears to be just that – replacement demand. By the time the standards war is over, people may have skipped DVDs altogether in favor of downloaded content.
As to Vista, Andy says:

If we take a look at enthusiast websites like HardOCP that have posted a preliminary performance preview of Intel’s Core 2 Quad processor we can already see tangible benefits from running the CPU on the aging Windows XP platform. Multicore processors will be ubiquitous, since there will no longer be any availability of single core processors in due time. The marriage of an OS that natively supports multicore processors with applications that also take benefit of multicore processors represents a staggering cost-benefit relationship that I believe most consumers and businesses will find hard to ignore.

Back to Pip:

Well… we think the implicit thinking – build cool technologies and watch price reduction contribute to generate lift-off for the market – is limited. Creating cool technology is a necessary condition but not sufficient. To consider what is “sufficient” we must bring the user into the equation.

Will the advantage of multi-core processors running code natively be enough of a crisis for most business spreadsheet users to throw away their existing systems and install all new ones, train their employees on how to use them and suffer the lost productivity while the transition is going on? Or will it be something that gets rolled out as the old machines wear out and need to be replaced anyway?

Unlike Andy and his fellow enthusiasts, there just isn’t that much of a crisis to “simply download the free public beta of Windows Vista RC1 here and download a 1080p Windows HD video here.”

And that is why while we agree with Andy’s assertion that semiconductor expansion is still needed, we continue to believe that any capacity growth greater than demand (remember – that is 6% annually) will simply destroy pricing and margins.

Disclosure: Author is short put options on DELL and long put options on the Semiconductor HOLDRs (SMH).

Disclosure: William Trent has a long position in SMH.

Topics: AT&T (T), AU Optronics (AUO), Advanced Micro Devices (AMD), Apple (AAPL), Corning (GLW), Dell (DELL), Hewlett Packard (HPQ), Intel (INTC), LG Philips LCD (LPL), Matsushita (MC), Microsoft (MSFT), Nokia (NOK), Qualcomm (QCOM), Semiconductor HOLDRS (SMH), Semiconductors, Sharp (SHCAY.PK), Software and Programming, Sony (SNE), Sprint Nextel (S), Stock Market, Technology, Verizon (VZ), Wireless | 1 Comment

Now This is a Quadruple Play

It has been said that cable’s major advantage over telcos and satellite tv is its ability to offer the “triple play” of video, voice and data over a single line. The ability to leverage its existing service to capture additional revenue streams gives it a unique edge that has been behind the telco’s own fiber roll-out.

At the same time, the telcos have enjoyed the advantage of wireless spectrum and services, which are largely replacing land-lines for voice service anyway. This gave the telcos a different triple-play: voice, data and wireless.

Thus the race was on to be the first to offer a quadruple play that included all four services. The telcos partnered with satellite companies, the cable companies partnered with independent wireless player Sprint-Nextel, and the telcos started their fiber expansion. But these interim partnerships appeared to us to be of limited value. There is no cost savings to the bells company from reselling satellite video – unlike video and data over the same pipe satellite was a different pipe, and one they didn’t own. Likewise for the cable companies offering wireless service. Until now. More »

Topics: AT&T (T), Communications Services, Siemens (SI), Sprint Nextel (S), Stock Market, Time Warner (TWX), Verizon (VZ) | 4 Comments