Synaptics (SYNA) is the leading provider of touch-based interfaces used on laptops and handheld devices such as music players and smartphones. It has an estimated 50%+ share of the notebook market, with a customer list that includes 9 of the top 10 notebook vendors (HPQ, DELL, etc.). Its non-PC business includes high-profile design wins for Apple iPods (Nano & Classic) and several new smartphones.
We believe the shares are very attractive here and represent more than just a trade on strong seasonal results for the Dec. quarter. Looking into 2008, demand for SYNA touch interfaces in smartphones could snowball as tech heavyweights such as AAPL and GOOG push a more open application environment onto consumer handsets.
To summarize the bull case:
Look For Strong Seasonal Results in SYNA’s Notebook and Non-PC Segments. Last night’s DELL results were driven by Notebook sales (+19% Y/Y). DELL plans to make notebooks one of its priorities in the coming years as it expects notebooks to grow at 6X the rate of desktops. Last week HPQ reported bullish results with notebook revenue +49% Y/Y. Moreover, strong sales results seem likely for iPods in both domestic and international markets this holiday season.
Early Participation In GOOG’s Android Effort Could Bear Fruit In 2008. SYNA is a founding member of the GOOG Open Handset Alliance. SYNA is providing the software driver for touch interfaces and is the only touch interface company in the alliance. Given its leadership position in the group, we would expect design wins to become visible as new handsets are announced in 2008.
Attractive Valuation With Room For EPS Upside. Trading at 19X F2009 Street consensus EPS, the shares look attractive relative to forecasted 50%+ EPS growth (PEG of 0.4). And, given strong trends in its core notebook business and strong seasonal growth likely in handhelds (iPods, Smartphones, etc.) SYNA could prove the Q2:F2008 (Dec) Street EPS consensus of $0.57 too conservative. Moreover, March quarter guidance (Q3:F08) for revenue growth of +29-38% Y/Y implies a fairly typical Q/Q decline (10-15% vs. 15% in Q3:F07), leaving room for upside from new handset design wins.
Friday, November 30, 2007
Wednesday, January 10, 2007
It's Too Early To Dump Research in Motion: Apple's iPhone Is Not Yet a Winner
January 10, 2006
Research in Motion (RIMM) stock fell $11.16 to $131 (7.9%) yesterday as investors concluded Apple (AAPL) iPhone will negatively impact RIMM's business prospects going forward.
AAPL will, undoubtedly, be a formidable competitor in the consumer smart phone space, however, in my view, it is too early for investors to declare victory for AAPL and defeat for RIMM.
Before hitting the panic button on RIMM shares, investors should stop to consider some key shortcomings of the iPhone offering:
1. iPhone Price Misses The Sweet Spot For Mainstream Consumers: Price is the key to unlocking consumer demand. At an entry-level price of $499 for the 4Gig unit, AAPL limits its appeal to high-end, high income users.
2. Touch Interface May Have Disadvantages: Speed typers accustomed to a traditional keypad experience are likely to be frustrated. Touch screens do not offer the same "tactile feedback" that keypads provide. Not to mention the oily residue left behind from fingers on the screen.
3. June Release a Risk For AAPL and Allows More Time For Competitors: Consumers may delay purchases of iPods and/or smart phones as they await the release of iPhone. However, Pearl is available today with an attractive feature set and a price ($199) that appeals to a much larger segment of consumers. Moreover, further innovations from RIMM are likely to come before June. For example, 3GSM (Feb 12-15th) could help increase visibility on RIMM future product plans.
Bottom Line: My outlook for RIMM remains optimistic as success for iPhone is not a "slam dunk". Upcoming triggers for RIMM include major share gains for Pearl (domestic and international) and details regarding new devices could become visible soon.
Disclosure: As of this writing, I hold a small long position in RIMM and no position in AAPL.
Research in Motion (RIMM) stock fell $11.16 to $131 (7.9%) yesterday as investors concluded Apple (AAPL) iPhone will negatively impact RIMM's business prospects going forward.
AAPL will, undoubtedly, be a formidable competitor in the consumer smart phone space, however, in my view, it is too early for investors to declare victory for AAPL and defeat for RIMM.
Before hitting the panic button on RIMM shares, investors should stop to consider some key shortcomings of the iPhone offering:
1. iPhone Price Misses The Sweet Spot For Mainstream Consumers: Price is the key to unlocking consumer demand. At an entry-level price of $499 for the 4Gig unit, AAPL limits its appeal to high-end, high income users.
2. Touch Interface May Have Disadvantages: Speed typers accustomed to a traditional keypad experience are likely to be frustrated. Touch screens do not offer the same "tactile feedback" that keypads provide. Not to mention the oily residue left behind from fingers on the screen.
3. June Release a Risk For AAPL and Allows More Time For Competitors: Consumers may delay purchases of iPods and/or smart phones as they await the release of iPhone. However, Pearl is available today with an attractive feature set and a price ($199) that appeals to a much larger segment of consumers. Moreover, further innovations from RIMM are likely to come before June. For example, 3GSM (Feb 12-15th) could help increase visibility on RIMM future product plans.
Bottom Line: My outlook for RIMM remains optimistic as success for iPhone is not a "slam dunk". Upcoming triggers for RIMM include major share gains for Pearl (domestic and international) and details regarding new devices could become visible soon.
Disclosure: As of this writing, I hold a small long position in RIMM and no position in AAPL.
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