Adobe (ADBE) yesterday reported a Q1, 2012 with only a slight increase in revenue over Q1 2011, with a decline in earnings per share (EPS). I use Adobe as a proxy for the computer software industry, but in this case special factors may have contributed to the poor showing, so the industry as a whole may do better in Q1. Adobe's fiscal Q1 2012 ended March 2, 2012, so it is a frontrunner to firms that report on a regular calendar basis (Q1's ending on March 31).
GAAP revenue was $1.045 billion, down 10% sequentially from $1.152 billion but up 2% from $1.027 billion year-earlier. Net income was $185.2 million, up 7% sequentially from $173.7 million but down 21% from $234.6 million year-earlier. Earnings per share (EPS) were $0.37, up 6% sequentially from $0.35 and down 20% from $0.46 year-earlier.
At the analyst conference call management claimed the poor showing was because of customers beginning to anticipate the future release of Creative Suite 6 (CS6). Creative Suite comes in a variety of flavors incorporating a number of Adobe software products such as the well-known Photoshop and Acrobat. Because the web is transitioning to include mobile devices and a new standard, HTML5, the products for web developers (including page layout, photo, animation, and video editing) are also changing rapidly.
Because of cost issues, developers sometimes do not upgrade to each new version. This was particularly true during the recession. If is possible that management is right in believing that the number of changes has become so great that CS6 will be a must-do upgrade even for customers that have CS5.5 or CS5, much less earlier versions.
The problem for web designers is that the design standards of 3 years ago, where they could count on a (well-designed) site appearing the same to viewers no matter which browser or operating system they used. Now every mobile device has a different screen size and many device users prefer apps, using a mobile web browser only as a last resort. What designers have had to do since the iPhone introduction is either write multiple web pages (one for desktop/notebook screens and one for each mobile device) or include programming on a single page that reformats that page for various screen configurations. Plus they
Given the endless complaining I have heard from fellow designers and programmers, I expect CS6 will be a big hit if it actually delivers the ability to design once and deploy, with minimal changes, to an assortment of devices. On the other hand if they think CS6 fails in that regard, they will probably cherry pick and only upgrade the Adobe software that work well for them.
The lower profits on flat revenues is attributable to up front investment in marketing and readying CS6 for deployment.
A number of pundits declared Adobe dead when Apple refused to support Flash animation on iPhones. So far Adobe is coping well with the new environment. It is the nature of IT things to see rapid die-offs and new growth.
Another area Adobe seems to be doing well in is helping its customers with dealing with another complex area, Internet advertising. A well-designed web page that does not generate ad revenue is not a good ROI. In January Adobe closed its acquisition of Efficient Frontier, which should help keep Adobe in the forefront of this area.
Today Adobe closed down $1.35 to $33.16. Its price to earnings ration was 29.5, which is pretty steep even if you buy the back-with-CS6 story. Adobe's lack of faith in its own future is shown by it's failure to pay a dividend. On the other hand it generated $314 million in free cash flow and ended with a cash balance of $2.8 billion.
CS6 is scheduled for release in late Q2, so probably in May. We will get a little bit of revenue feedback when Q2 results are announced in June.
Disclaimer: I don't have a position in Adobe. I do use some Adobe software, and I am long in a variety of technology stocks that might have relationships with Adobe.
Showing posts with label iPhone. Show all posts
Showing posts with label iPhone. Show all posts
Tuesday, March 20, 2012
Wednesday, May 11, 2011
TTM Technologies (TTMI) Grows with Smartphones, Tablets
TTM Technologies (TTMI) makes the printed circuit boards (PCBs) that are the backbones of electronic devices; it is the largest PCB manufacturer based in the United States. Last year it acquired a Hong Kong based company with multiple manufacturing facilities in China. Most U.S. PCB manufacturing is now for prototypes and relatively small runs for low-volume end products. By designing and prototyping in the U.S. and doing full-scale runs in China, TTM has created a lot of utility for U.S. based technology companies. It has been running at near capacity, while continuing to expand capacity.
One of the main drivers of increased capacity is tablet computing devices, following the leading edge created by smartphones. This is not just a matter of increased volume. All the electronics have been shrunk, meaning the PCBs themselves involve a higher level of technology than they did a decade ago. This has been good for TTM since many smaller players have been unable to invest in the newest technologies, and TTM gets better profit margins on the higher-technology boards.
With the Chinese acquisition TTM's business has become somewhat more seasonal. The U.S. business was (and still will be) affected by summer vacations and December holidays. Since it is mainly about prototyping and low volume runs for medical, industrial, and aerospace devices, it was not much affected by the Q3 bulge seen in many consumer oriented electronics companies. In China, however, there is a slowdown during the Lunar New Year, and since much of the work is for consumer smartphones, computers, and tablets, there will by Q3 bulges.
Last Thursday, reporting for Q1 2011 ending March 31, 2011, results were solid once seasonality is accounted for. Revenues were $342.8 million, down 8% sequentially from $373.4 million, but up 148% from $138.2 million year-earlier. GAAP Net income was $29.1 million, down 20% sequentially from $36.5 million, but up by a factor of 6 from $4.5 million year-earlier. GAAP EPS (earnings per share) were $0.33, down 20% sequentially from $0.41, but up 230% from $0.10 year-earlier.
Guidance was for Q2 revenue between $350 and $370 million. GAAP EPS $0.28 to $0.37; non-GAAP EPS $0.36 to $0.45.
TTM has a strong cash position at $202 million, and is rapidly paying off its $321 million debt. It is also investing in more equipment in China to keep up with the pace of producing PCBs for iPhones, iPads, and other smartphones and
I own TTM stock, and believe it was a good strategic acquisition for my portfolio (I bought it cheap during the recession). I did not want to try to pick a winner among Apple, Google & partners, etc., for the smartphone/tablet computer revolution. But companies like Applied Materials (AMAD) and TTM provide the infrastructure for the revolution, no matter who wins what market share. There are some exceptions, of course, and plenty of competition in the PCB and semiconductor capital equipment spaces, but so far the strategy has worked pretty well.
For more details on TTM's recent performance, see my TTM Technologies Q1 2011 analyst call summary. One notable fact from management answering analyst questions was that labor costs, per hour, have increased 18% recently. This does not put much pressure on TTM margins, since the factories are highly automated. It does indicate that China is moving to a internal-consumption economy. The rich there are buying all the iPhones Apple can supply, and for middle management and the the working class there are now OPhone type smartphones available at a far lower cost.
See also TTM Technologies
One of the main drivers of increased capacity is tablet computing devices, following the leading edge created by smartphones. This is not just a matter of increased volume. All the electronics have been shrunk, meaning the PCBs themselves involve a higher level of technology than they did a decade ago. This has been good for TTM since many smaller players have been unable to invest in the newest technologies, and TTM gets better profit margins on the higher-technology boards.
With the Chinese acquisition TTM's business has become somewhat more seasonal. The U.S. business was (and still will be) affected by summer vacations and December holidays. Since it is mainly about prototyping and low volume runs for medical, industrial, and aerospace devices, it was not much affected by the Q3 bulge seen in many consumer oriented electronics companies. In China, however, there is a slowdown during the Lunar New Year, and since much of the work is for consumer smartphones, computers, and tablets, there will by Q3 bulges.
Last Thursday, reporting for Q1 2011 ending March 31, 2011, results were solid once seasonality is accounted for. Revenues were $342.8 million, down 8% sequentially from $373.4 million, but up 148% from $138.2 million year-earlier. GAAP Net income was $29.1 million, down 20% sequentially from $36.5 million, but up by a factor of 6 from $4.5 million year-earlier. GAAP EPS (earnings per share) were $0.33, down 20% sequentially from $0.41, but up 230% from $0.10 year-earlier.
Guidance was for Q2 revenue between $350 and $370 million. GAAP EPS $0.28 to $0.37; non-GAAP EPS $0.36 to $0.45.
TTM has a strong cash position at $202 million, and is rapidly paying off its $321 million debt. It is also investing in more equipment in China to keep up with the pace of producing PCBs for iPhones, iPads, and other smartphones and
I own TTM stock, and believe it was a good strategic acquisition for my portfolio (I bought it cheap during the recession). I did not want to try to pick a winner among Apple, Google & partners, etc., for the smartphone/tablet computer revolution. But companies like Applied Materials (AMAD) and TTM provide the infrastructure for the revolution, no matter who wins what market share. There are some exceptions, of course, and plenty of competition in the PCB and semiconductor capital equipment spaces, but so far the strategy has worked pretty well.
For more details on TTM's recent performance, see my TTM Technologies Q1 2011 analyst call summary. One notable fact from management answering analyst questions was that labor costs, per hour, have increased 18% recently. This does not put much pressure on TTM margins, since the factories are highly automated. It does indicate that China is moving to a internal-consumption economy. The rich there are buying all the iPhones Apple can supply, and for middle management and the the working class there are now OPhone type smartphones available at a far lower cost.
See also TTM Technologies
Tuesday, January 1, 2008
Apple iPod Sales Decelerate?
According to an article (Holiday CE sales slower than last year) at EE Times Asia, sales of portable music players (MP3 players) declined in the U.S. during the first three weeks of the holiday shopping season. Of course Apple dominates this sector of the consumer electronics market with its iPod MP3 players.
Several caveats before you sell your Apple (AAPL) stock: I don't know how accurate this report is. If it is accurate, it is possible that Apple gained market share, that is the losses came out of other player makers like Creative Zen, Sony, or SanDisk.
But here are some numbers on the bad news: "Dollar sales of MP3 players between Nov. 18 and Dec. 9 were down 16 percent from the same period last year, while unit sales declined 9 percent, the NPD Group said."
With dollar sales down more than unit sales, it is very possible that people are tired of $400 iPods breaking or being stolen. They are buying down market.
And who wants an MP3 player now, who does not already have one? Plus the Apple iPod is getting pretty retro; it does not look innovative any more. Maybe kids have learned that they don't need the iTunes music service to load music into their iPods or non-Apple music players.
Apple won't give Q4 numbers to investors until January 22nd. Sales of iPhones and iMacs may make up for iPod weakness, if there really is any.
But Apple's stock is flying pretty high, maybe not bubble high, but investors have shown a great deal of confidence that it can only go up, and that usually happens before a fall. Apples P/E (Price to Earnings) ratio is over 50. That is justifiable only if Apple revenues and profits continue to grow at the hot pace of the last few years.
On the other hand, Apple has its fans. If Q4 numbers are weak they may not be deterred. Maybe Steve Jobs will announce some fantastic income stream for 2008. Maybe he wants Appleheads to buy iPhones instead of iPods now.
Still, I'd advise caution to anyone thinking of buying Apple stock right now. Congratulations to those of you who bought it in 2000, when the future looked bleak.
Always diversify your risk. Any stock that has become a disproportionate position in your portfolio should be whittled down.
I don't own Apple stock, and I own stock in competitors like AMD and Microsoft (but also in chipmaker Marvell that supplies chips for Apple products).
More data:
My Apple page
Apple corporate investor page
Nasdaq Apple data summary page
Several caveats before you sell your Apple (AAPL) stock: I don't know how accurate this report is. If it is accurate, it is possible that Apple gained market share, that is the losses came out of other player makers like Creative Zen, Sony, or SanDisk.
But here are some numbers on the bad news: "Dollar sales of MP3 players between Nov. 18 and Dec. 9 were down 16 percent from the same period last year, while unit sales declined 9 percent, the NPD Group said."
With dollar sales down more than unit sales, it is very possible that people are tired of $400 iPods breaking or being stolen. They are buying down market.
And who wants an MP3 player now, who does not already have one? Plus the Apple iPod is getting pretty retro; it does not look innovative any more. Maybe kids have learned that they don't need the iTunes music service to load music into their iPods or non-Apple music players.
Apple won't give Q4 numbers to investors until January 22nd. Sales of iPhones and iMacs may make up for iPod weakness, if there really is any.
But Apple's stock is flying pretty high, maybe not bubble high, but investors have shown a great deal of confidence that it can only go up, and that usually happens before a fall. Apples P/E (Price to Earnings) ratio is over 50. That is justifiable only if Apple revenues and profits continue to grow at the hot pace of the last few years.
On the other hand, Apple has its fans. If Q4 numbers are weak they may not be deterred. Maybe Steve Jobs will announce some fantastic income stream for 2008. Maybe he wants Appleheads to buy iPhones instead of iPods now.
Still, I'd advise caution to anyone thinking of buying Apple stock right now. Congratulations to those of you who bought it in 2000, when the future looked bleak.
Always diversify your risk. Any stock that has become a disproportionate position in your portfolio should be whittled down.
I don't own Apple stock, and I own stock in competitors like AMD and Microsoft (but also in chipmaker Marvell that supplies chips for Apple products).
More data:
My Apple page
Apple corporate investor page
Nasdaq Apple data summary page
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