Friday, August 8, 2014

Dot Hill, Nvidia analyst conferences

"For every sad fly, there is a happy spider"

Two interesting things happened this week near me.

Dot Hill (HILL) barely met prior guidance for Q2, and investors were hoping a slew of new customers for Dot Hill's advanced storage systems would bring in results well above guidance. The stock took a major hit following the Thursday morning Dot Hill results release and analyst conference (my notes).

The main issue in the quarter was a particular customer, typically Dot Hill's second largest, bought fairly little in the quarter. This customer services large datacenter installations, and revenue variance each quarter is significant. Dot Hill believes the customers orders will resume.

In addition, July bookings have been strong, and 4 customers are likely to release major new Dot Hill based storage systems before the end of the year. Q2 was back-end loaded, so a fair amount of product went out at the end of the quarter that will book revenue in Q3.

So what did I do? I bought more HILL yesterday, basically buying back the shares I sold in March for $5.88 per share for just $3.51. Most of my shares I bought long ago for between $1 and $2 per share.

Of course Dot Hill management could be wrong, revenue and profits might not ramp in Q3 and Q4 and on into 2015. But I think it is likely they will, and Dot Hill will be far more valuable by mid 2015 than it is today. However, keep in mind that Dot Hill has disappointed in the past. Being a small-cap data storage provider is a difficult business.

The Nvidia Q2 conference seemed like it would provide no surprises until, near the end, an analyst asked about the bitcoin computing phenomena that had raised rival AMD's results in Q4 and Q1, but then hurt them when demand dropped off in Q2.

CEO Jen-Hsun Huang said why Nvidia GPU's were typically not used for bitcoin mining, or cryptocurrency in general. AMD's GPUs provide more performance per dollar. Mr. Huang argued extensively earlier in the conference (and in prior conferences) that because of its installed base and superior software, Nvidia GeForce GPU's are gamers' favorites. Maybe so, but it appears to be a well known fact in the computational community that if you want a lot of computation for your buck you want to go with AMD. The reality is that certain workloads do better with Nvidia's architecture, and certain workloads do better with AMD. I see this all the time, even within games, with some games getting better benchmarks with AMD, others doing better with Nvidia, assuming the same pricing range.

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