TRID Bad News
There was a basic strategy with TRID: they are oversold (trading almost at cash) and are turning the corner with more design wins.
There is no TRID specific news. There was an announcement today by SIA that chip sales are weakening, especially memory chips.
What about the LCD TV Market?
* Corning is doing very well. they are the leading supplier of LCD glass. http://seekingalpha.com/article/80065-corning-lcd-tv-sales-up-confirms-guidance-for-q2
"The company confirmed that it is not seeing evidence of an economic downturn affecting LCD TV sales in the U.S. To the contrary, GLW said that LCD TV unit sales were up at least 30% year-over-year for each of the first four months of 2008. The company expects sales of LCD TVs to continue to be strong."
* Samsung is doing very well. They are the world's leading LCD TV seller and a top TRID customer. "Samsung's profits were up 37% in the first quarter of 2008 with profits of $2.2 billion on sales of $17.2 billion. Much of Samsung's growth was generated from LCD TV sales, especially those 46-inches and above. The company's LCD business generated 53% year-over-year growth itself."
* LG, the 2nd largest LCD TV seller, reported 82% growth. http://www.24-7pressrelease.com/pdf/2008/05/26/press_release_51151.pdf
* According to displaysearch Q1 2008 LCD TV units shipped grew 69% year-over-year. http://www.displaysearch.com/cps/rde/xchg/displaysearch/hs.xsl/6575.asp
One of the following may be at work:
1. Demand concern - the US market is rapidly eroding and there may be fears that CHina and other countries are not able to pick up the slack. Is this valid? Fear about the future is always valid, but they seem to be discounting expectations pretty significantly
2. More direct competition - bigger companies may enter the market.
3. ZRAN specific competition. ZRAN had an analyst meeting yesterday. Perhaps they leaked some gains in th emarket. It doesn't seem to have done much: both TRID and ZRAN downshifted.
In fact, all graphics makers were down today: Pixelworks, Silicon Image, Neomagic, etc.
3. Greater price erosion
4. Missed design wins - This is the big one. TRID is riding past design wins to drive cash growth. They need to expand the wins.
My take is general fear of a major consumer electronics slowdown.
A basic comparison of fundamentals demonstrates how negative the market has become about TRID:
Price to Cash:
TRID is 1 (at cash value)
ZRAN is 2.6
SIMG is 2.6
Price to Sales:
TRID is .9
ZRAN is 1.5
SIMG is 1.7
Operating Margins
TRID had 11%
ZRAN had -0.2%
SIMG had 7%
The fundamentals above are why I thought $10 for TRID was a slam dunk. Clearly, the market assumes TRID is worthless. Ouch. With such a strong negative sentiment, it is hard to add. I would sell, but at this point, why bother.
There is no TRID specific news. There was an announcement today by SIA that chip sales are weakening, especially memory chips.
What about the LCD TV Market?
* Corning is doing very well. they are the leading supplier of LCD glass. http://seekingalpha.com/article/80065-corning-lcd-tv-sales-up-confirms-guidance-for-q2
"The company confirmed that it is not seeing evidence of an economic downturn affecting LCD TV sales in the U.S. To the contrary, GLW said that LCD TV unit sales were up at least 30% year-over-year for each of the first four months of 2008. The company expects sales of LCD TVs to continue to be strong."
* Samsung is doing very well. They are the world's leading LCD TV seller and a top TRID customer. "Samsung's profits were up 37% in the first quarter of 2008 with profits of $2.2 billion on sales of $17.2 billion. Much of Samsung's growth was generated from LCD TV sales, especially those 46-inches and above. The company's LCD business generated 53% year-over-year growth itself."
* LG, the 2nd largest LCD TV seller, reported 82% growth. http://www.24-7pressrelease.com/pdf/2008/05/26/press_release_51151.pdf
* According to displaysearch Q1 2008 LCD TV units shipped grew 69% year-over-year. http://www.displaysearch.com/cps/rde/xchg/displaysearch/hs.xsl/6575.asp
One of the following may be at work:
1. Demand concern - the US market is rapidly eroding and there may be fears that CHina and other countries are not able to pick up the slack. Is this valid? Fear about the future is always valid, but they seem to be discounting expectations pretty significantly
2. More direct competition - bigger companies may enter the market.
3. ZRAN specific competition. ZRAN had an analyst meeting yesterday. Perhaps they leaked some gains in th emarket. It doesn't seem to have done much: both TRID and ZRAN downshifted.
In fact, all graphics makers were down today: Pixelworks, Silicon Image, Neomagic, etc.3. Greater price erosion
4. Missed design wins - This is the big one. TRID is riding past design wins to drive cash growth. They need to expand the wins.
My take is general fear of a major consumer electronics slowdown.
A basic comparison of fundamentals demonstrates how negative the market has become about TRID:
Price to Cash:
TRID is 1 (at cash value)
ZRAN is 2.6
SIMG is 2.6
Price to Sales:
TRID is .9
ZRAN is 1.5
SIMG is 1.7
Operating Margins
TRID had 11%
ZRAN had -0.2%
SIMG had 7%
The fundamentals above are why I thought $10 for TRID was a slam dunk. Clearly, the market assumes TRID is worthless. Ouch. With such a strong negative sentiment, it is hard to add. I would sell, but at this point, why bother.
posted by Andrew at
8:15 PM
7 Comments:
samsung moving towards genisis chips. more 46inch models now are shipped with genisis.
simg don't make any video related chips. they make hdmi related chips.
sony is the only big guys still using trid chips
GNSS was always thrown out as a rival to TRID before it was acquired by STM for $336M (a large premium over sales & cash).
At the time of the acquisition, GNSS was unable to compete with TRID in terms of quality. GNSS offered a solid low-end solution.
At the time of the last earnings call, TRID still dominated Sony, Samsung and LG and was trying to penetrate Phillips.
Have things changed in 1 month?
The reality is this: investors hate TRID. Nevermind that it wsa doing more business than GNSS, its valuation was lower. Nevermind that it had better technology. Nevermind that it was growing and profitable when all competitors were shrinking and unprofitable.
The reality is: investors hate TRID. So the question to ask: is it worth staying in? What does it take to get investors positive?
I forgot to add, I included SIMG as an example of valuations.
I am not sure if you listened to last CC where Trident management said Zoran is not their direct competitor. Am I missing something ?
ZRAN is one of the only other LCD controller makers out there and is very much competing with TRID. What you read/heard was more about the difference between low-end TVs (ZRAN focus) and high end TVS (TRID's focus).
Indeed, they are very focused on set-top boxes (a new TRID focus) and DTV.
The point is that, when compared to other companies in the same arena, TRID trades at a massive 80% discount.
I'm not sure about TRID being a good buy in a "recession" period. What are your thoughts on the fact that this is a consumer discretionary industry (LCD TVs etc.) and people will be wanting to cut back ? Can TR?ID survive this cycle or could it go under
Andrew,
sometimes, it may be a good opportunity to get into trid to make the fortune. According to warren buffet, when people scare, we should jump into it if the fundamental of the company is good and future is bright.
thanks
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