Ticonderoga Securities Networking & IT Hardware: Taiwan-China Trip Day 1; iPad Coming on Strong

October 6, 2010 8:44 AM EDT
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Ticonderoga Securities Networking & IT Hardware / Taiwan-China Trip—Day 1 by Brian White

iPad Coming on Strong in H2CY10. One of our contacts supplies into Apple (Nasdaq: AAPL)(Buy-rated) products such as the iPad and iPhone. Our contact shipped over 6 million components (1 per iPad) into the iPad during 3QCY10, and initial forecasts are calling for 7 million units in 4QCY10. These unit numbers are well above our iPad forecasts of 3.8 million in the September quarter and 5.37 million in the December quarter. Essentially, this equates to 13 million units for the second-half of CY10 versus our forecast of 9.17 million units. For CY2011, our contact believes Apple could sell as many as 45 million iPads, or more than double our estimate of 21.8 million.

Next-Generation iPad on the Way in 1QCY11. Our contact also indicated that the next-generation iPad will replace the first-generation iPad sometime during 1QCY11. Our contact indicated the next-generation iPad will be smaller (~7 inches) and include the Retina display that was recently introduced on the iPhone 4. Additionally, a micro or mini USB and camera will be available, while capacity is expected to double to 128GB.

IT Prices Stabilize, But TV Panel Prices Fall Further. During our LCD panel meeting, we sensed the IT market was the biggest disappointment during 3Q10.

Utilization Has More Downside; Profitability Comes Under Pressure. During our LCD meeting, we sensed utilization rates fell further over the past few weeks, and thus, 4Q10 utilization rates could fall from 3Q10...We continue to believe our LCD coverage universe of AU Optronics (NYSE: AUO)(Neutral), LG Display (NYSE: LPL)(Sell), Corning (NYSE: GLW)(Sell) will remain challenged.

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