Archive

Archive for April, 2011

FA Notes April 29, 2011

April 29th, 2011 No comments

Buffett on inflation and Bernanke. Link

NFLX – DirectTV is considering a streaming service to compete with Netflix. Link

ARMH AMD – ARM CEO is trying to get AMD to abandon x86 for ARM architecture. Link

INTC – Intel’s SSD product road-map. Link

RIMM – 2011 product line-up leak. Link

SPWRA – Total, the French oil company, bid $23.25 for 60% of SunPower, a 46% premium. Link

EB+ ACOM CAT NTGR CSTR
EB- RIMM

Today’s POMO $5-7 billion
Sell-side Jefferies downgrades RIMM from Buy to Underperform

Interview with a trader, Peter Brandt. Link

Categories: News

FA Notes April 28, 2011

April 28th, 2011 No comments

jobless

Q1 GDP 1.8% vs. 2.0% est. GDP price index 1.9% vs. 2.2% est.
Jobless claims 429K vs. 390K est.

sandwich_cost_breakdown
Fortune: Sandwich component costs sky-rocket. Link

Excelon to Buy Constellation Energy for $7.9 billion in a stock deal. Link

Today’s POMO: $5-7 billion

EB+ AET (guidance)
EB- AKAM SAP

Categories: News

FA Notes April 27, 2011

April 27th, 2011 No comments

bernanke-printing-press

Fed keeps rates unchanged. “Extended” language still included. Will complete the full $600B QE2. Commodity inflation is “transitory”

AAPL – Apple responds with a Q&A on the iPhone location data controversy. Link

SVVS – CenturyLink acquires Savvis for $2.5 billion in cash and stock. Link

SINA – CEO says no immediate plans to spin-off microblog operations. Link

Compal lowers 2011 notebook unit guidance from 55M to 48M due to tablets. Link

UMC – UMC is cautious about Q2. Link

SMOD – Why Silver Lake acquired this SSD maker. Link

Today’s POMO: 0
Sell-side: Goldman removes BRCM from Conviction Buy list. Goldman downgrades YOKU to Neutral

EB- AUO MIPS

Categories: News

FA Notes April 26, 2011

April 26th, 2011 No comments

sonytab

SNE – Sony unveils 2 tablets to be released later this year. Link

Carl Icahn responds to the New York Times. Link

LWSN – Lawson Software agrees to a take-under acquisition at $11.25. Link

GOOG – YouTube to expand its movie-on-demand service. Link

Facebook Deals service starting today in 5 test cities. Link

Buffett’s bet against hedge-funds tightens. Link

Today’s POMO: $1.5-2.5 billion
Sell-side: Janney downgrades NFLX to Sell
EB+ UA F CMI TKR AGCO IIVI MMM
EB- LXK
Trading Radar IIVI TKR AGCO CMI

Categories: News

My Response to Copperfield Research’s OCZ Report

April 23rd, 2011 3 comments

In this post, I will lay out my response to the two most serious claims in Copperfield Research’s OCZ report. Then I will show why the current and future fundamentals of this AMERICAN company are strong with real revenue and real products, nothing like the Chinese reverse mergers with phantom revenues and vapor-ware products that Copperfield Research compared OCZ to. Moreover I will also show why OCZ will “highly likely” post fantastic financial numbers and guidance on their May 3rd, 2011 earnings report.

1) Copperfield Research is “shady, suspect, and deceitful” in manipulating the media

On March 22, 2011 Copperfield Research issued a report on EBIX with the title “Not a Chinese Fraud” to get attention. Using the sensationalistic keyword “Chinese Fraud”, even though it had nothing to do with the substance of the report, it got the publicity they wanted to drive down the stock and profit from their short position.

On April 20, 2011 Copperfield Research did the same saying OCZ “may just be the American version of the story above [a Chinese reverse merger stock implosion example]. This time Copperfield Research never uses the word “fraud” anywhere in their post or report. However that didn’t stop the media, bloggersphere, and Twitterati from using the “fraud” word over and over again spreading the Copperfield Research OCZ report story WITHOUT DOING ANY ANALYSIS on the veracity of the report’s claims.

2) Irreconcilable Financials Claim

10Q Filing – 1/14/11
Picture 3.png

8-K Earnings Press Release – 1/10/11
Picture 1.png

Amended “Fixed” 10Q Filing – 4/21/11
Picture 2.png

Copperfield Research noted that the November 2009 quarter revenue segment table category numbers in the 8-K earnings filing and the 10Q filing did not match up and appear flipped. Instead of accepting the easy explanation of a typographical error by some poor first-year accountant who couldn’t copy/paste correctly, Copperfield Research alleged OCZ is deliberately trying to mis-lead investors by over-stating 325% y/y SSD growth because obviously the 10Q filing number has to be correct right? Wrong. [of course Copperfield Research insinuates the worst possible scenario, they are short OCZ stock]

OCZ filed an amended 10Q Thursday afternoon fixing the “typographical error” in the 10Q filing to MATCH the 325% SSD growth rate in the 8-K earnings filing. Here’s a quote from the OCZ press release [Link]:

“This morning the Company filed an amended 10Q for the period ending November 30, 2010 that corrects certain typographical errors in line item data related to product group revenue… The totals in the historical financials as previously presented were correct and no restatement of the financials is necessary.”

Yes I will repeat “no restatement of the financials” is necessary. The OCZ bears will have you believe a simple typographical error of a revenue segment table [remember the revenue totals were accurate, it was just the segment categories with the 325% SSD revenue growth y/y number actually being CORRECT] is the same thing as a Chinese reverse merger company mis-stating revenue by hundreds of millions of dollars, that is like saying Roseanne Barr is as beautiful as a Victoria Secret super-model. That just isn’t right!

3) CEO’s past criminal record

Copperfield Research’s alleges that the company withheld information about the CEO’s criminal background to investors during the recent equity secondary capital-raise. Here is Needham [one of the under-writers] analyst’s response:

“Information Withheld On CEO’s Past: FACTUALLY INACCURATE. The buyside was made known of the CEO’s youthful indiscretions many years ago through the filings as well as throughout the roadshow, and our own conversations suggest that investors were not concerned with something so old and irrelevant to current product roadmaps and the future of the company.”

And Craig-Hallum [one of the under-writers] analyst’s response:
Picture 4.png

Here are the facts. The OCZ CEO has publicly admitted that his only felony conviction was in 1998 for “trafficking in stolen property in exchange for marijuana,” which was later reduced to a misdemeanor.

SEC Rule 401(f) clearly states a company must disclose if an executive “was convicted in a criminal proceeding or is named subject to a pending criminal proceeding” in the past 10 years. It is clear the company has gone above and beyond their legal obligations from the responses above.

That being said, it isn’t great that the CEO of OCZ tried to exchange stolen property for pot when he was younger even if it was many years ago. One must remember though when Steve Jobs was younger he once built and sold “blue box” whistles that let you steal from the phone company and make calls for free.

Steve Jobs also lied and basically stole money from his partner Steve Wozniak over payment from the work they did in making Breakout for Atari. People makes mistakes, would you short Apple today just because Steve Jobs did some bad even criminal things when he was younger? Of course not, you would research Apple’s products, reviews, how products are selling, and future fundamentals.

4) OCZ SSD Drives are the best reviewed products in the industry and are selling like hot-cakes

I recommend everyone to ask their computer nerd friends what is the best reviewed SSD drive on the market. If he or she knows anything, they will say OCZ Vertex 3.

Storage Review OCZ Vertex 3 Review [Link]:

In one generation OCZ has managed to nearly double its speed in synthetic benchmarks and blow the socks off older drives in real-world scenarios. Given the intended market of performance enthusiasts, the Vertex 3 will no doubt be a huge success..

Puts other SSDs to shame in our real world benchmarks.. Pricing makes top-tier performance available for only a moderate premium.. The OCZ Vertex 3 spanks the competition with up to 69% faster speeds in real-world conditions and has firmly established itself as the fastest SATA SSD we’ve seen.

Anandtech on OCZ Vertex 3 [Link]:

“If you were excited about the performance of the Vertex 3 Pro but were put off by the price, it looks like that’ll be a non-issue thanks to the Vertex 3. The performance of this second generation of SandForce based SSDs is nothing short of astounding.”

Sure the reviews are great for the new OCZ Vertex 3 SSD drives, but how is it selling? Newegg.com is OCZ’s largest customer. I have been checking OCZ Vertex 3 product listings on Newegg.com in recent weeks and have noticed EVERY TIME the product goes in-stock it sells out WITHIN HOURS.

I’m not the only one noticing this, here is an internet post on the OCZ Vertex 3 sell-out mania [Link]:

Picture 6.png

End market customers are also gushing over the performance of the OCZ Vertex 3. Read the customer reviews on Newegg.com with quotes like this:

“Absolutely mind-blowing load performance” “This type of speed will spoil you!” “Rating: 5/5 Very Fast – Best Hardware Purchase” “Blisteringly fast! Works flawlessly”

With great reviews, high demand, and happy customers, I am extremely confident that the newly released OCZ Vertex 3 SSD drives will sell like hot-cakes for at least another 2-3 quarters. SSD drives are definitely one of the hottest secular growth stories in technology for 2011 and OCZ is the leader of this tech sub-sector.

5) OCZ will “highly likely” post fantastic financial numbers and guidance on their May 3rd, 2011 earnings report

On 3/7/2011 [Link]: OCZ pre-announces upside for Q4-2011 ending on February 28th, 2011. Revenue will approximately be $64 million up +97.5% y/y. SSD revenue will be +380% y/y and +40% q/q.

On 3/28/2011 [Link]: OCZ guides fiscal year 2012 revenue to $300-330 million (+60-75% y/y)

On 4/13/2011 [Link]: OCZ raises $94 million in cash in a secondary common stock offering.

On 4/21/2011 [Link]: OCZ announces May 3rd, 2011 earnings date for Q4 earnings.

Why is it highly likely OCZ will post fantastic Q4 numbers and guidance when they report earnings on May 3rd, 2011? Because they ALREADY PRE-ANNOUNCED fantastic Q4 numbers and guidance. On March 7th, 2011 they pre-announced amazing +97.5% y/y revenue growth and +380% y/y SSD revenue growth. On March 28th, 2011 they guided FY2012 revenue growth to +60-75% y/y.

In the past when OCZ reports earnings, they report the quarter and give guidance for the full year. Both revenue for the quarter and guidance for FY2012 have already been announced in recent weeks, so I believe it is highly unlikely especially just after raising $94 million capital a week ago, the company would change full year guidance for the worse.

So after all this above let’s look at the current situation. According to Yahoo Finance, 19.7% of OCZ’s float is held short as of March 31, 2011. It is highly probable this short interest has increased significantly in the past 2 trading days in the after-math of Copperfield Research’s OCZ report by short-term term traders who haven’t done any in-depth research on the truth behind Copperfield Research’s misleading innuendo and claims. Do the shorts really know the fantastic fundamentals of OCZ’s “best in class” SSD products, how big demand is, and how fast Vertex 3 is selling out? I doubt it.

How many companies in the technology market have revenue growth of +97.5% y/y today? How many companies have a product segment like OCZ’s SSD that has had a revenue growth ramp of +27% y/y, +81% y/y, +325% y/y, and +380% y/y in the past 4 quarters [amazing accelerating growth]? Not many.

Even Copperfield Research admits OCZ may have potential design wins from the likes of IBM, EMC, and HP. Will the shorts really want to be short when those tier 1 customer names are revealed? Will the shorts really want to be short when OCZ continues to post blockbuster growth numbers?

I actually called OCZ on Thursday to ask them if they would defend themselves point-by-point against the Copperfield Research report. What OCZ said was very telling: “We will let our numbers do the talking.” I don’t know about you, but I wouldn’t want to be short OCZ on May 3rd, 2011.

If you want more details on the OCZ growth story, I highly recommend their PowerPoint presentation the company gave at the Roth Growth Stock conference in March 2011 which can be found here: [Link]

Disclosure: At time of writing, the author is long OCZ stock which he initiated during the sell-off on the April 20th.

Categories: News

FA Notes April 21, 2011

April 21st, 2011 No comments

TRAD – Monex acquires Tradestation for $9.75 in cash.

AAPL – What Apple can do with its $65.76 billion in cash? Link

Fortune article on the RenRen IPO. Link

Sell-side: Goldman Downgrades SINA to Sell Link
EB+ SCSS
Today’s POMO: 0

Trading Radar: SCSS TRAD

Categories: News

Copperfield Research Magically Releases Bearish OCZ Report the Day after Large Put Option Volume

April 21st, 2011 1 comment

As many of you know, Copperfield Research released a bearish report on OCZ today that had a detrimental impact on the stock price. I’m not going to do a point-by-point analysis of the ridiculous innuendo and claims in their report. The sell-side actually did a good job today refuting it (call your Stifel or Needham broker to get the defenses).

Copperfield Research has a history of putting in sensationalist key-words (“House of Cards” “Chinese reverse merger” “Not a Chinese Fraud”) in their reports and head-lines to get attention that have nothing to do with the companies they are covering. Shameful in my opinion, but it shows you the kind of character they have.

I bought shares in OCZ today as I believe the company makes the best performing SSD drives in the world today (read the customer reviews on Newegg, reviews by leading tech enthusiast sites like Storage Review), has tons of cash (they just raised $94 million last week), and many quarters of amazing growth ahead in what I believe is the best secular growth product cycle in technology today (SSD drives). There is no way this company is a fraud as Copperfield implies; I would bet my left arm on that, but that is neither here nor there as the fundamentals will come out and the stock price will reflect this in time.

I just want to point out this below.

Picture 1.png

Picture 2.png

On Copperfield Research’s Seeking Alpha profile page they explicitly say they do not use options to establish positions prior to a report’s publication. Moreover they do not discuss unpublished reports, or provide advanced warning of future reports to others.

Yet on 4/19/11, the day before the release of Copperfield Research’s bearish OCZ report, Minyanville’s Steve Smith noticed large put option activity on May $7.50 strikes, when OCZ stock was trading in the mid $9 range. Since Copperfield Research doesn’t let anyone know about their reports ahead of time, that put option volume must have happened by magic right? Pure coincidence I’m sure.

Disclosure: At time of writing, the author is long OCZ stock.

Categories: News

FA Notes April 20, 2011

April 20th, 2011 No comments

Central banks in South Korea, Thailand, and Malaysia intervened to slow the rise of their currencies against the U.S. dollar. Link

AAPL – Reuters confirms the September launch of iPhone 5. Link

Epic (maker of Gears of War) is worried about the future of the gaming industry due to 99c app games. Link

GS – Meredith Whitney lays into Goldman management. Link
Goldman Sachs’s nature to wait for client volumes to come back,” said Whitney. “It feels structurally long-lived. So what happens over the next few quarters if we still have volumes like this?”

Viniar began with his standard-issue I-don’t-like-to-make-predictions disclaimer. Then he got to the meat of the matter—sort of: “If volumes continue to stay where they are or get slower and we think they’re going to stay that way, then we’re going to have to make some changes whether to capital, to head count, or to other expense items.”

EB+ VMW INTC 
EB- CREE

Trading Radar: VMW INTC
Today’s POMO: $1-2 billion
WSJ: Negative on INTC “Premature Party”

Categories: News

FA Notes April 19, 2011

April 19th, 2011 No comments

STX – Seagate to buy Samsung’s hard-drive business for $1.38 billion. Link
Western Digital accounted for 31 percent of global hard drive shipments in the fourth quarter, followed by Seagate’s 30 percent, Hitachi’s 18 percent, Toshiba’s 11 percent and Samsung’s 10 percent, according to IHS ISuppli estimates last month.

More thoughts on RenRen IPO. Link

Net bubble 2.0. Venture capitalists and outside investors are throwing money at tech start-ups. Link

AAPL – Apple sues Samsung due to copying iPhone and iPad look/feel. Link

NYTimes on Carl Icahn. Link
Besides, he thinks the markets are headed for a fall. “You’ve got to be a fool if you don’t think there will be a correction,” he says.

HAUP – Hauppauge Colossus gets weak review. Link

Zillow files for an IPO. Link

Profile on Twitter investor Fred Wilson. Link

ERTS – Trailer for upcoming Battlefield 3 game. Link

EB+ CR MICC
EB- BMI

Trading Radar: CR BMI
Today’s POMO: $5-7 billion

Categories: News

FA Notes April 18, 2011

April 18th, 2011 No comments

Excerpt from a book that covers Google’s ordeal in China. Link

S&P lowers U.S. outlook to negative. Link

CYH – Community Health gets a U.S. subpoena. Link

STX WDC – Samsung may be looking to sell its hard-drive business to Seagate. Link

RenRen files to go public at a $4 billion valuation. Link Link

DMD – Demand Meda reaffirms FY2011 guidance after getting hit last week on worries that Google’s algorithm changes hurt their traffic. Link

CSCO – Cisco killer Huawei increased their profit by 30% in 2010. Link

AAPL – Concord Securities, Ming-Chi Kuo, says iPhone 5 will come out in September. Link

Analysis of the top 4 social networks in China. Link

Sitting all day is bad for you. Link

Dropbox hits 25 million users and 200 million files per day. Link

EB+ TITN GWW
Today’s POMO: $1.5-2.5 billion
Sell-side: Goldman upgrades AONE
Barrons: Positive on RIMM

Trading Radar: GOOG TITN GWW

Categories: News