|SIMO reported last night, and gave tepid guidance, lowering full year 2019 sales guidance from $500m to $415m.|
The good : not much! EMMC/UFS did well growing 20% over an awful Q1, and client SSD grew 15%. Oddly, NAND makers were strong in client SSD while module makers were weak. I expected the opposite. Open channel SSDs are in production at Ali Babba. Q4 is supposed to have sales up from Q3 by a healthy amount, so the trajectory into 2020 may be strong. Lotsa cash on the balance sheet, more than ten bucks per share, and no debt.
The bad: lotsa crap. Shannon declined 40% in Q2 after declining 40% in Q1. I guess it’s almost gone! For client SSDs in H2 2019 they say shipments will grow faster than sales, which means price per unit is declining, which may mean they are selling older cheaper legacy models and fewer new state of art expensive models. Bad for the future. Gross margins forecast to decline from here, that sucks. Open channel SSDs are in production, but the total sales outlook remains weak, so this segment is perhaps too small to move the needle. The Shannon business is so bad they had to write down inventory, and will probably write down all the goodwill associated with the acquisition. It’s small enough now that who cares?
The strange: no word on the new office building that they are supposed to be building. Why not? It’s a big expenditure, amend was announced 10 months ago. The long term revenue outlook for almost ALL SIMO business lines now is uncertain, but the shares are cheap and cash rich. Seems like a dog, but revenues are expected to rise in Q3 and rise again in Q4, so it could be worse. Stock probably goes nowhere, they continue to pay a dividend, be profitable, maybe get acquired, or maybe some product area (Shannon? Enterprise SSDs? client SSDs? ) drives modest 2020 growth? Who knows? Zero confidence in the future with SIMO at this point.....but most segments have collapsed already so it’s hard for them to fall off a cliff from the canyon floor.