Put this in the FWIW column, although I've read some of Gujavarty's work in the past, and IMHO it has been pretty solid. But I've seen interviews in the WST that were totally off base, with the interviewee basically just talking his book.
Deutsche Bank Senior Analyst Sees NAND Flash As Having Greatest Potential; SanDisk Memory (SNDK) A Buy-Rated Stock
On Friday August 27, 2010, 12:25 pm EDT
67 WALL STREET, New York - August 27, 2010 - The Wall Street Transcript has just published its Semiconductors Report offering a timely review of the sector to serious investors and industry executives. This Special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: Inventory Replenishment and Corporate Upgrade Cycles - Smartphones As Major Trend - Secular Shift To Mobility
Companies include: AMD (AMD); ARM Holdings (ARMH); AT&T (T); Altera (ALTR); Apple (AAPL); Atheros (ATHR); Atmel (ATML); Best Buy (BBY); Broadcom (BRCM); and many more.
In the following brief excerpt from the Semiconductor Special Report, expert analysts discuss the outlook for the sector and for investors.
Bob Gujavarty joined Deutsche Bank AG in July 2005. Prior to joining DB, he spent six years working at Intel Corp., where he held a variety of roles, including positions in finance, manufacturing and marketing. Over the previous two years, Mr. Gujavarty led Intel's Xeon processor retail technical marketing efforts in China. He holds an MBA from the University of Texas at Austin and a B.S. from Carnegie Mellon University.
TWST: What about the PC side? Are we seeing similar trends there?
Mr. Gujavarty: The trajectory we find in PCs is interesting. We entered the year thinking something like low double digits. Then in April or so, we got pretty optimistic because of better-than-seasonal PC demand, and people started thinking a 20%-type PC unit growth year. Now we're back to somewhere in between, like 15% to 16% a year or so. I think that's a good number. We think 15% to 16% PC unit growth this year is a reasonable number, and we're actually somewhat positive that that growth will extend into next year. What's been interesting on the PC side, from our perspective, is that enterprise has surprised with its strength, while consumers surprised us a little bit with its weakness. It's a reverse from last year, where consumers held in better even though corporates didn't spend at all. And now we're having a bit of a reverse of that this year, with enterprise PCs doing better than consumer PCs.We should also talk about NAND. NAND is a great growth industry; we're pretty positive on it. We're expecting NAND revenues to grow 50% this year, after growing 20% last year. So that's a very good performance over two years. We expect NAND to be a $22 billion-revenue industry in 2010, and that's basically double from 2005, when it was about an $11 billion market. NAND is a great growth industry this year, and it's also a secular growth market in memory. We like the NAND market, and we think that that market is going to continue to grow very nicely even next year. It's early yet, but we're forecasting 10% growth for the NAND market next year.
TWST: What are the big drivers in the semiconductor space right now?
Mr. Gujavarty: Right now semis tend to be very heavily influenced by the macro economy. If you look at semiconductor industry growth rates, they don't correlate very well to absolute GDP, but they do correlate very highly to the rate of change of GDP. So in an accelerating GDP environment, semis tend to outperform, and in a decelerating GDP environment, semis tend to underperform. So they tend to get influenced by macroeconomic growth rates, and that's the historical precedent. In the second half of the year, there is some concern about slowing macroeconomic growth. It's weighing on the sector right now. But from our perspective, we think the key end markets, like PCs, like handsets, will have a pretty typical seasonal back half, maybe slightly below seasonal. But they'll do fine overall because the first half was so strong. For example, PC units were up 1% Q-on-Q in 2Q. That's very atypical; they tend to be down 2% to 3%. So above-seasonal first half, and we think a slightly below-seasonal second half for PCs is reasonable. But again, for the full year, we still think you get somewhere around 15% PC unit growth this year. In handsets it seems like we're going to have a typical second half, which is typically second-half-over-first-half 15%-type growth for the handset industry.
TWST: What about specific names? Who do you like right now and why?
Mr. Gujavarty: Within memory, we like SanDisk because we like NAND flash. We have a "buy" on SanDisk. Micron, we have a "hold" because we're a little worried about DRAM. Like I said, it's going to have a great year this year as a snapback, but looking a little further out into 2011, we're a little bit cautious, so we have a "hold" on that. In terms of PCs, we tend to like the PC cycle. We think this is a multiyear upgrade cycle in terms of 15% this year and another double-digit year next year. Intel is very well exposed to enterprise as well, so we have a "buy" on Intel. We have "holds" on AMD and NVIDIA because they tend to be a little bit more consumer exposed. So even though there is a theory about rising tide lifting all boats, we think that's a little less true this year because consumer PCs will weigh on NVIDIA and AMD, who have much higher exposure to the consumer side and less exposure to the enterprise side.
We do like Fairchild and ON Semiconductor; they do have varying levels of PC exposure, but we think they're relatively cheap stocks. And a 15%-PC-unit-growth year should be pretty good for those guys as well. Analog, which is a sector we haven't really talked about, is a little bit more broad based. Analog companies tend to not have high concentration in just one segment, like PCs or handsets; they are much more broadly exposed. They have exposure to industrial, military as well as PCs and handsets, and communication-like wireline and wireless networking. Analog companies tend be a little bit less volatile and less focused on a particular end market. They're a little bit more of a broader play on the macroeconomy and the macroeconomic conditions. In that space, we tend to like companies that have some kind of specific drivers, like Intersil (ISIL) because it's a faster-growing company than many of its analog peers, and we think that continues with a market share-taking theme. We like National Semiconductor (NSM) because we think they're going to be a share taker as well, and it has margins above the industry average.
The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This Special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online .
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