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Ticonderoga on IT Hardware & Networking Industry / Taiwan Tech Trip-Computex - Day 1

May 31, 2011 10:03 AM EDT
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Price: $2.39 --0%

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    1 Buy, 2 Hold, 0 Sell

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    Up: 13 | Down: 11 | New: 11
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Ticonderoga on IT Hardware & Networking Industry / Taiwan Tech Trip-Computex - Day 1 by Brian White

White said, "China Handsets Weaken. Our meeting with a consumer electronics component supplier highlighted recent order cuts by China-based handset and consumer electronics companies due to inventory adjustments. We believe revenues with these China-based programs will be hard pressed to grow sequentially during 2Q11 and well below original forecasts. In our coverage universe, COGO (Nasdaq: COGO)(Buy) is clearly the most susceptible to inventory adjustments in these markets, as digital media (nearly one-half is handsets) contributed 55% of 1Q11 sales, and we estimate approximately three-quarters of this business is consumed in China. Overall, the IT market sounded stronger than the LCD TV market during the June quarter, but both are expected to grow. Similar to most companies we met with thus far on this trip, concerns regarding Japan have dissipated in recent weeks."

"TV Demand Muted but Panel Prices on the Move Higher - Our meeting with a LCD TV vendor highlighted weak demand during 2Q11 but also rising panel prices. For example, LCD TV unit volumes are expected to decline sequentially in 2Q11 and below historical seasonality due to continued weakness in the U.S. and European markets. Demand in South America, the Middle East and South East Asia was cited as strong. Regarding pricing, our contact expects 32-inch panel prices to rise by 2-3% Q/Q in 2Q11 and 42-inch to increase by 2-4%; however, a reversal in pricing is anticipated in 3Q11 as our contact does not believe demand supports the recent uptick. Regarding the LCD panel industry, we believe sequential volume growth in shipments is still on track for 2Q11 and pricing is moving higher; however, we believe losses will continue to plague the industry in 2Q11. Without sustainable demand for LCD TVs, we expect our LCD coverage of AU Optronics (NYSE: AUO)(Neutral), Corning (NYSE: GLW)(Sell) and LG Display (NYSE: LPL)(Sell) to remain challenged this year."

"Many Tablets at Computex but ASUS Shows Off Differentiated Portfolio - Tablets are everywhere at Computex this year but we believe most will have a difficult time competing with Apple’s (Nasdaq: AAPL)(Buy) iPad 2. That said, the company that caught our attention at the show today was ASUS (2357, NT$300.00, NR), which is rolling out some bold, unique tablet-related solutions that differentiate ASUS from the rest of the crowd. For example, the company was showing off its newly released tablet called the 10.1-inch Eee Pad Transformer based on the Android Honeycomb 3.0 operating system (now upgradeable to 3.1). We believe the PadFone will be available in 4Q11, while the 10.1-inch Eee Pad Slider SL 101 is expected in late summer. Finally, ASUS showed off another unique tablet-related product called the 7-inch Eee Pad MeMO 3D ME173 that includes a “glasses-less” 3D IPS screen that allows for calls and includes a miniature mobile phone; it is expected to be available in 4Q11."


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