Ticonderoga on Networking & IT Hardware: Another Big Tech OEM Struggles With Revenue Trends
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Rating Summary:
22 Buy, 14 Hold, 1 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 11 | Down: 12 | New: 13
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Ticonderoga on Networking & IT Hardware: Another Big Tech OEM Struggles With Revenue Trends by Brian White
Ticonderoga analyst said, "Another Big Tech OEM Provides a Soft July Quarter Sales Outlook. Last night, Dell (Nasdaq: DELL)(NotRated) reported 1QFY12 revenue of $15.02 billion (down 4% Q/Q) that came in below the Street's estimate of $15.41 billion; however, the company delivered better than expected profitability and the stock reacted positively to the EPS upside in after-market trading last night. More important to the tech supply chain, Dell was the third big tech OEM over the past week to provide a July quarter sales outlook that came in below the Street estimate, which indicates to us that the leading EMS providers and other tech supply chain companies could be at risk to disappointing sales trends in the coming months."
"Consumer PC and Public Markets Disappoint in 1Q. Dell highlighted healthy demand in the Enterprise market and continued strength in the corporate PC refresh cycle during 1QFY12; however, weakness was experienced in the public segment and in the consumer PC market. In 1QFY12, mobility sales declined 3% Q/Q, desktop PC sales declined 8% Q/Q, and servers and networking declined 6% Q/Q. Storage dropped 16% Q/Q."
"Derivative Thoughts on Continued PC Challenges—FLEX and LCD. The continued weakness in the consumer PC business was voiced by two leading tech OEMs this week. Flextronics (Nasdaq: FLEX)(Sell) is the most exposed to this market in our EMS universe, while our LCD coverage universe of Corning (GLW, $20.28, Sell), AU Optronics (NYSE: AUO)(Neutral) and LG Display (NYSE: LPL)(Sell) is also reliant on PC growth. While Dell outsources more manufacturing to Taiwan ODMs compared to North American EMS providers, the OEM was listed as one of Flextronics' important customers in FY10 and the EMS provider is in the midst of a new notebook/ODM ramp with a few different customers, including Dell."
"Dell Expects a Mid-Single-Digit Uptick in 2Q but Below Street Estimate. Looking into 2QFY12, Dell expects sales to rise sequentially by a mid-single digit percentage driven by year-end spending by local and state government, along with education spending as the fiscal year nears an end. Also, the company is counting on "solid" back to school spending, which we believe is wishful thinking at this point in time, along with the timing of Sandy Bridge offerings. Assuming a sales uptick of 5% Q/Q, this equates to revenue of $15.77 billion and below the current Street estimate of $16.0 billion."
"Brocade on Tap This Thursday and Tech Data Next Monday. Also reporting earnings over the next few days will be Brocade Communications (Nasdaq: BRCD)(NR), which is scheduled to report earnings this Thursday, and Tech Data (Nasdaq: TECD)(NR), on tap for next Monday."
Ticonderoga analyst said, "Another Big Tech OEM Provides a Soft July Quarter Sales Outlook. Last night, Dell (Nasdaq: DELL)(NotRated) reported 1QFY12 revenue of $15.02 billion (down 4% Q/Q) that came in below the Street's estimate of $15.41 billion; however, the company delivered better than expected profitability and the stock reacted positively to the EPS upside in after-market trading last night. More important to the tech supply chain, Dell was the third big tech OEM over the past week to provide a July quarter sales outlook that came in below the Street estimate, which indicates to us that the leading EMS providers and other tech supply chain companies could be at risk to disappointing sales trends in the coming months."
"Consumer PC and Public Markets Disappoint in 1Q. Dell highlighted healthy demand in the Enterprise market and continued strength in the corporate PC refresh cycle during 1QFY12; however, weakness was experienced in the public segment and in the consumer PC market. In 1QFY12, mobility sales declined 3% Q/Q, desktop PC sales declined 8% Q/Q, and servers and networking declined 6% Q/Q. Storage dropped 16% Q/Q."
"Derivative Thoughts on Continued PC Challenges—FLEX and LCD. The continued weakness in the consumer PC business was voiced by two leading tech OEMs this week. Flextronics (Nasdaq: FLEX)(Sell) is the most exposed to this market in our EMS universe, while our LCD coverage universe of Corning (GLW, $20.28, Sell), AU Optronics (NYSE: AUO)(Neutral) and LG Display (NYSE: LPL)(Sell) is also reliant on PC growth. While Dell outsources more manufacturing to Taiwan ODMs compared to North American EMS providers, the OEM was listed as one of Flextronics' important customers in FY10 and the EMS provider is in the midst of a new notebook/ODM ramp with a few different customers, including Dell."
"Dell Expects a Mid-Single-Digit Uptick in 2Q but Below Street Estimate. Looking into 2QFY12, Dell expects sales to rise sequentially by a mid-single digit percentage driven by year-end spending by local and state government, along with education spending as the fiscal year nears an end. Also, the company is counting on "solid" back to school spending, which we believe is wishful thinking at this point in time, along with the timing of Sandy Bridge offerings. Assuming a sales uptick of 5% Q/Q, this equates to revenue of $15.77 billion and below the current Street estimate of $16.0 billion."
"Brocade on Tap This Thursday and Tech Data Next Monday. Also reporting earnings over the next few days will be Brocade Communications (Nasdaq: BRCD)(NR), which is scheduled to report earnings this Thursday, and Tech Data (Nasdaq: TECD)(NR), on tap for next Monday."
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