Technology Opportunity - media.angelnexus.commedia.angelnexus.com/pdf/tao/tao-october-2015-k0c.pdf · October 2015 Issue 6 Technology Opportunity & Following the recent descent of

October 2015

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Often, there is no correlation between the success of a company’s operations and the success of its stock over a few months or even a few years. In the long term, there is a 100 percent correlation between the success of the company and the success of its stock. This disparity is the key to making money; it pays to be patient, and to own successful companies.

— Peter Lynch

Back in June, we closed out our position on image processing and video compression company Ambarella Inc. (NASDAQ: AMBA). Ambarella was coming off an incredible quarter at the time, but valuations had simply become too rich for our blood, and we couldn’t help but secure what was a 108% gain at the time

As it turns out, our timing on the sale of Ambarella was just about perfect. After selling at $117 on June 15, we saw Ambarella top out at $126 just three days later, followed by a four-month slide and 50% cut in valuation.

Of course, we don’t posses a crystal ball, and as much as I’d like to pretend this were true, we didn’t know Ambarella was just three days away from a top at the time.

We do, however, posses a few key tools, including a contrarian philosophy, strict valuation principles, and a basic understanding of market psychology, which allowed us to get out at the right time.

Here’s what we said back in our June issue:

Ambarella’s first quarter earnings came out on June 2. The results were absolutely stellar:

• $71.0 million in revenue (up 73% from the previous year)

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• Gross margin at 64.7% (up from 62.5%)• Net income at $18.9 million (up from $5.3 million)• Cash at $235.2 million (up from $155.6 million)

As counterintuitive as it may seem, though, we’re actually going to issue a sell recommendation on the company this issue.

There really is so much to like about Ambarella, but P/E ratios (72.12 trailing as I write) are simply getting out of hand. The stock has been on an absolute tear, but rallies like this can’t last forever, and we don’t want to get caught up in the hype.

It’s likely we’ll re-enter Ambarella at a later date, but for now, we’re sitting on a 107.8% gain we’d be best off securing.

While this certainly came a bit sooner than expected, the hype around Ambarella has officially subsided, and valuations have come back down to earth. That said, we’ll be taking a fresh look at Ambarella and recommending a new buy-under price in this month’s issue.

We also have one very closely related stock that we’ll be adding to our portfolio. It’s a company you’ve almost certainly already heard of but one we’ve been ignoring because of the initial hype surrounding it.

Like Ambarella, this stock has taken a beating in recent months, which means it’s cheap. If you’re going to own just one of the two, it should be Ambarella, but the buying opportunity is compelling for both.

108% Gains and Back for More: Ambarella Inc. (NASDAQ: AMBA)

Ambarella develops low-power computer chips for high-definition and ultra-HD video compression and image processing.

The company’s products are used in a variety of applications including security IP cameras, sports cameras, wearable cameras, flying cameras (drones), and automotive video processing solutions.

Most notably, Ambarella provides chips for action camera OEM GoPro Inc. (NASDAQ: GPRO). Ambarella’s lower-power solutions allow for longer battery life, and its compression algorithms allow for more storage.

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Ambarella gets an estimated 35% to 40% of its revenue from GoPro, which has resulted in a tight correlation between the two stocks in terms of valuation.

On September 1, Ambarella released a second-quarter earnings beat alongside softened third-quarter guidance. Specifically, Ambarella cited an expected decline in wearable camera sales, which sparked a sell-off in both companies.

But the expected decline in sales for the third quarter is not so much a product of long-term demand as it is an issue of temporary product cycles. The reason given for the expected decline was simply that GoPro and similar customers were not launching any new products this season.

Rest assured, though, that the long-term demand for high-quality video compression remains strong, as does demand for wearable cameras as a whole:

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Ambarella is also beginning to become less reliant on GoPro as a customer in the wearable camera market. Most notably, the company is diversifying to other camera makers such as Chinese electronics giant Xiaomi.

Here are Ambarella’s comments back from the first quarter:

In the past, GoPro was the majority of business, and I think with Xiaomi ramping up, I definitely think Xiaomi will start shipping very good volumes. And we like to see the sell-through number before we make a comment about your question, but I think for this particular quarter, we do see Xiaomi start to become a bigger percentage of our sports camera.

It’s worth highlighting, too, that while the market likes to tie Ambarella directly to GoPro and Xiaomi, sports cameras are less than half of Ambarella’s business. With the stock falling 50% in value since June solely on concerns of decreased sports camera sales, it’s pretty easy to see that the market has overreacted here.

This is especially true considering the growing demand for Ambarella’s remaining verticals...

During the company’s second-quarter conference call, Ambarella CFO George Laplante indicated that the company is experiencing increased demand from retailers for consumer security cameras, as well as from service providers such as AT&T and Comcast.

I think what we talked about in our Q1 call was the consumer IP security market going from low single-digit as a percent of revenue in the beginning of the year, and we feel it will exit the year in the high single digits as a percentage of revenue. So that’s a pretty significant increase for us. We are on track to see that growth. We do believe that service providers are going to play a key role in that growth as more of them introduce bundles with security cameras included, like Comcast and AT&T.

According to a new report from Transparency Market Research, the video surveillance market is expected to reach $42.81 billion by 2019, growing at a CAGR of 19.1%. Within this massive market is IP-based video surveillance, where Ambarella is the market leader.

IP surveillance is expected to grow faster than any other surveillance system at a CAGR of 24.2% through 2019. Growing installations of IP cameras and need for surveillance cameras with better video quality is driving this demand.

Markets and Markets has a very similar outlook, saying:

The global video surveillance market revenue is estimated to grow from $13.98 billion in 2013 to $42.06 billion in 2020 at a CAGR of 16.97% from 2014 to 2020.

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The IP system market is expected to grow at a CAGR of 23.51%. This growth is heralded by increased awareness regarding the IP system across the globe.

Of course, with the Internet as pervasive as it is today, headlines tend to blow things out of proportion and mislead the public. Despite excellent execution in all other aspects of Ambarella’s business such as IP video, the market has decided to focus on nothing but Ambarella’s wearable segment.

If you take the time to dig deeper, though, you’ll find some major discrepancies in company performance and stock performance. Below is a snippet from the third-quarter call showing how falling wearable sales have been taken out of context:

I’d also like to point out that overall, Q3 guidance is showing that the wearable market is going down sequentially and also year over year because of the product ramping up slightly different from last year. But even with that down, our Q3 growth is still 40% year over year. I think that’s an indication that we continue to extend our business on other markets.

If 40% growth isn’t compelling enough, let’s just break down a few more financial figures the market seems to have forgotten about.

First, we have continuous growth in profitability. Ambarella has not only recorded a profit every single quarter as a publicly traded company, but it’s increased net income by 618% since its IPO and has nearly tripled margins over the last three years.

Further, Ambarella also has zero debt, $239.7 million in cash (and growing), and assets 6.2 times liabilities.

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Following the recent descent of Ambarella’s share price, the company now trades at a trailing earnings ratio of 24.53, putting it about on par with the broader tech market.

With significant growth drivers, though, and a truly stellar financial picture, the stock is a screaming long-term buy.

We rate Ambarella Inc. (NASDAQ: AMBA) a “Strong Buy” under $62.00.

New Recommendation: GoPro Inc. (NASDAQ: GPRO)

As you may have guessed by now, the closely related stock we’ll be recommending next to Ambarella is the highly recognized GoPro Inc. (NASDAQ: GPRO).

Now, this isn’t the kind of stock we usually recommend to readers. It’s high profile enough that most of you are already aware of its existence and don’t need our help locating it.

But finding under-the-radar companies isn’t the only thing we do here at Technology and Opportunity. Well-known stocks are always on our radar so long as the market begins to under-price them, and that’s exactly what’s happened to GoPro in recent months.

We’ve already highlighted the basic bull case for GoPro above. Wearable camera revenue and shipments are growing at an exponential rate and are expected to continue doing so for the foreseeable future.

Yet like Ambarella, the stock has only become cheaper in recent months. In fact, it’s hovering at an all-time low with the initial IPO price acting as a support:

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This rapid decline in share price has occurred for a number of reasons, including:

• Ambarella’s comments regarding lower wearable sales

• A collection of analyst downgrades

• The reveal of Xiaomi’s Yi Action Camera

We’re prone to believe the market has largely overreacted to these concerns.

For one, we’ve already addressed that wearable sales are forecast to grow substantially in the long term. Ambarella’s comments were specifically in reference to new product launches in the third quarter and were taken out of context.

GoPro has not insinuated a sales slowdown in its latest quarterly report. In fact, the company has the following to say:

We’re excited to report another quarter of great execution and terrific results. Year-over-year second quarter revenue grew 72% to $420 million and resulted in an EPS of $0.35. Our performance was driven by the growing strength of our global brand new products and the continued success of our HERO4 line of cameras and accessories.

As for analyst downgrades, the price cuts were not only overdone and based off a flimsy thesis (a disappointing HERO4 launch), but the market has already pushed pricing below the revised $35 price targets.

As much as I’d have liked to put this into my own words, independent analyst John Divine has said it for me:

While I’d prefer to have more trenchant analysis from professional analysts and research firms, I’m thankful for one thing: Their shortsightedness is creating a remarkable buying opportunity for the individual investor.

Moving on to the threat of emerging competitors, such as recent product releases from OEMs like Xiaomi, GoPro’s market position is quite secure. It’s already established itself as the action camera brand, much in the way Apple is established as the leading smartphone brand.

The parallel between Apple and GoPro is something investors should pay attention to. Back in 2013, there was much ado about low-end OEMs challenging Apple’s dominance. The market was worried second-tier brands would blood the market and kick Apple off its perch.

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But instead we saw just the opposite happen: Apple sales grew to record highs despite more and more competitors entering the scene. Why? Because overall demand was growing, and those who can afford premium consumer electronics tend to purchase just that.

The reality is that Xiaomi’s Yi Action Camera is as much a threat to GoPro’s dominance as its “Mi 4” smartphones are to the Apple iPhone 6s. GoPro is simply not after the same market, not only from an economic standpoint but a geographic one as well.

When it comes down to it, a knock-off is a knock-off to consumers. You can have the same specs under the hood (it’s all just a wrap around Ambarella’s technology, after all), but brand reputation goes a long way when it comes to premium pricing models.

As proof, all we need to look at is GoPro’s recent performance outside the U.S., where the Yi Action Camera was launched.

Last quarter, GoPro’s overseas revenues jumped 126%, accounting for over half of its top line (that’s up from 66% growth in the first quarter).

The company’s cameras have been beyond popular in China, which boosted its Asia-Pacific revenues by 183%.

Despite the market’s natural focus on North America, overseas demand is primed to offset slower growth in the U.S. market. Moreover, GoPro’s new initiatives, like VR filmmaking, drone cameras, automotive cams, and media expansion, are all poised to become new sources of revenue growth.

Financials

As is the case with Ambarella, GoPro’s stock is moving in the opposite direction of its financial performance.

The company reported $128 million in profit last year on $1.4 billion in sales on sharply expanded margins, compared to the prior year when its profit came in at about $61 million on $986 million in sales.

GoPro’s results have consistently trounced its own guidance, beating company estimates by about 50% every quarter. As mentioned earlier, the company last reported 71.7% revenue growth quarter over quarter.

Not to mention GoPro is sitting on over half a billion in cash and zero debt. Its profit margins aren’t as robust as Ambarella’s, but they’re solid at 11.1%.

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When we look at this stock going down, it’s just been mind-boggling. No debt, lots of cash, massive growth, a highly recognized brand, and a forward P/E of 14.0? Yes, please.

We rate GoPro (NASDAQ: GPRO) a “Strong Buy” under $32.00.

Portfolio Snapshot and Updates

Analog Devices, Inc. (NASDAQ: ADI)

Snapshot:

Analog Devices is a semiconductor company specializing in data conversion and signal processing technology. The company develops analog-, mixed-, and digital-signal processing integrated circuits (ICs) used in industrial, automotive, consumer, and communication markets worldwide

Updates:

No official news from Analog this month, but we do have an upgrade from Citi analyst Christopher Danely from “Neutral” to “Buy” and a $66 target. Danely cited a “solid” business model, increasing margins, and upside from the Apple design win we discussed last month as reasons for the upgrade.

Applied Materials, Inc. (NASDAQ: AMAT)

Snapshot:

Applied Materials is an American manufacturer that supplies various equipment, services, and software to semiconductor fabricators — among other technology-based industries — to enable the manufacture of a wide range of electronic components.

Updates:

Analysts (RBC and Deutsche Bank) continue to cut price targets on semiconductor leaders including Applied Materials, but we’re not buying into the added fear. The market has known for some time that 2016 will be a year of strong headwinds, but prices can only move so low, and we’re already seeing a sharp rebound in big players such as Micron.

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If you’re confident in a company long term, the only thing you need to do is average down when the stock dips. Don’t let a temporary decline in semiconductor CapEx fool you; AMAT’s dominance in this space remains solid.

Atmel Corporation (NASDAQ: ATML)

Snapshot:

Atmel is a semiconductor manufacturer that makes microprocessors and microcontrollers used in machine-to-machine (M2M) communication. This expands from the connected home all the way to vehicles that communicate with each other.

The list of markets Atmel is currently going after includes industrial automation, energy management, smart homes, building automation, connected vehicles, mobile electronics, and wearables.

Updates:

Last issue, we speculated on an Atmel buyout, and that’s exactly what it looks like is going to happen. U.K.-based Dialog Semiconductor has announced it will be buying out Atmel with a mix of cash and stock totaling roughly $4.6 billion.

Specifically, Atmel stockholders are to be paid $4.65 in cash and just over 10% of a Dialog Semiconductor ADR (OTC: DLGNF) for each existing share they possess. This equated to ~$10.42 per share, which represented a premium of 43% to Atmel’s closing price on the date of the announcement.

However, since the acquisition was first announced, Dialog shares have dropped significantly, which is why Atmel shares are now trading around $8.63. This sets Atmel up for a disruptive bid (Cypress Semiconductor was speculated to be the company to do it), but there’s honestly no telling how things will play out at this point.

Now that Atmel’s share price is closely tied to Dialog, things are going to get a little complicated moving forward. The stock has been volatile, which reflects the market’s uncertainly about what’s going to happen.

If you can’t stomach the uncertainty, now would be the time to make your exit, but we’re going to see this through coverage-wise. Keep an eye out next month for more details.

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CalAmp Corp. (NASDAQ: CAMP)

Snapshot:

CalAmp Corp. provides wireless communications solutions for various applications worldwide. It offers solutions for mobile resource management, machine-to-machine (M2M) communications, and other emerging markets that require connectivity. Its M2M and MRM solutions enable customers in energy, government, transportation, and automotive markets to optimize their operations by collecting, monitoring, and reporting business-critical data from remote and mobile assets.

Updates:

CalAmp released its second-quarter results, finally providing us with some vindication for what’s been a very under-appreciated company. We’ve been in the red the last few months, but investors loved the results and shares have jumped nearly 25% since the call.

Here are the highlights:

• Quarterly revenue rose 18% year over year to $69.8 million

• Earnings beat estimates by $0.01, at $0.27 per share ($9.8 million net)

• Datacom revenue up 23% to $61.8 million

• Satellite segment at record margins of 27.6%

As we had explained in our original thesis for CalAmp, fleet management is a major growth driver for the company, and in listening to the conference call, it’s clear the company is executing in this segment:

We continue to see strong demand for products used in fleet management and asset tracking applications both domestically and with key international customers. In fact, the second quarter represented the strongest quarter ever for fleet management product sales. Customer demand in the U.S. was particularly robust with solid demand also coming from customers in Canada, Europe, Latin America and the Pacific Rim.

Total recurring revenue from fleet management and communications services rose 23% year over year to $11 million, or 15.9% of total revenue.

Outlook for the remaining half of fiscal 2016 is also solid. According to CEO Michael Burdiek:

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“Our momentum exiting the quarter, coupled with an expanding pipeline of opportunities, is providing CalAmp with a strong tailwind heading into the second half of fiscal 2016.”

CalAmp raised both ends of its previous revenue guidance by $1 million, resulting in a new range of $281 million to $289 million.

Corning Inc. (NYSE: GLW)

Snapshot:

Corning Inc. manufactures high-quality ceramic and glass material for consumer and industrial applications. The company is best known for its incredibly durable Gorilla Glass, commonly found in consumer devices such as smartphones and tablets.

Updates:

Corning declared its quarterly dividend of $0.12 per share on October 7. The dividend will be distributed on December 11 to holders of record on November 13.

Fabrinet (NYSE: FN)

Fabrinet provides foundry services to optics OEMs. In short, the company has high-level expertise at putting together optical components for other optoelectronic companies using its precision process technologies. The company’s technologies and systems include materials and process analysis, optical and electro-mechanical assembly, fiber handling and alignment, packaging, and various testing services.

Updates:

No news on Fabrinet this month. In case you missed the last update, though, here’s a quick recap of second-quarter earnings:

First, we saw great execution in the company’s optical communications business, which turned in a very solid quarter, increasing 34% year-over-year and 8% sequentially. This was driven by significant growth in datacom, which now accounts for 37% of revenue.

The non-optical segment performed nicely, too, after a disappointing third quarter. The segment is up 17.5% year over year and 11% sequentially.

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For the year, Fabrinet reported a profit of $43.6 million, or $1.21 per share. Revenue was reported as $773.6 million.

As for outlook, the company expects its per-share earnings to range from $0.41 to $0.43 for the current quarter and revenue in the range of $206 million to $210 million.

We also got some confirmation of the long-term revenue goals for Fabrinet West, the company’s newly built 74,000-sq.-foot Silicon Valley facility:

So the contribution from revenue from our Fabrinet West operation in the September quarter is still going to be pretty de minimis. I don’t think it’s certainly going to be anything that we’re likely to call out when we do this call again a quarter from now.

As we look longer term into the opportunity that we believe that facility holds, I don’t think there’s any change there about our expectation that this is going to be a critical component of our longer-term growth strategy, especially as it relates to transferring products from that NPI facility here in the US, to volume production in Thailand. So looking out on a longer-term basis -- and again, that longer-term contribution is still probably more of a 2017 event than it really is a 2016 event. We’ll wait and see as we get a little further into this.

But I still think the expectation there is for ultimately this operation to be measured in tens of millions of dollars on a quarterly basis.

Fanuc Corporation (OTC: FANUY)

Snapshot:

Fanuc Corporation is a leader in industrial robotics, with a product lineup that includes factory automation systems, laser cutting, motion control, and compact motors. Fanuc serves a wide range of industries including aerospace, agriculture, construction, metal forming, and automotive manufacturing.

Updates:

No company news or updates this issue.

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Intel Corporation (NASDAQ: INTC)

Snapshot:

Intel Corporation designs, manufactures, and sells integrated digital technology platforms worldwide. It is the single-largest provider of semiconductors by revenue. It operates through PC Client Group, Data Center Group, Other Intel Architecture, Software and Services, and “All Other” segments.

Updates:

This month, Intel announced that it’s getting into the driverless car market in a very specific way: cyber security. Specifically, Intel Security has set up the Automotive Cyber Review Board (ACRB) with the intention of codifying “best practices and design recommendations for advanced cybersecurity solutions.”

While still vague, Intel’s creation of ACRB addresses the largely unserved market of automobile cyber security. Gartner predicts that by 2020, the number of connected passenger vehicles on the road will be about 150 million, which bodes well for any firm getting a head start in this market.

International Business Machines. (NYSE: IBM)

Snapshot:

IBM is an American multinational technology and consulting corporation, with headquarters in Armonk, New York. IBM manufactures and markets computer hardware, middleware, and software. The company provides infrastructure, hosting, and consulting services in areas ranging from mainframe computers to nanotechnology.

Updates:


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InTEST Corp. (NYSE: INTT)

Snapshot:

INTT is a semiconductor capital equipment company, which means it manufactures machines used in the production of electronic components.

The semiconductor capital equipment industry can be divided into two classes: front-end and back-end. The front-end involves silicon wafer and computer chip fabrication. The back-end involves assembly, packaging, and testing.

InTEST works on the back-end of this cycle, providing automatic test equipment (ATE) used by semiconductor manufacturers to test their integrated circuits and wafer products.

Updates:


Iridium Communications Inc. (NASDAQ: IRDM)

Snapshot:

Iridium is a global communications provider. The company offers the world’s most extensive voice and data service through a fleet of next-generation low-orbit satellites. It is currently launching the NEXT satellite constellation to serve the machine-to-machine (m2m) communications market.

Updates:

No official news for Iridium this month, but you can expect a breakdown of third-quarter results next issue. For those who don’t wish to wait, the company will be releasing its third-quarter results and hosting a conference call on Thursday, October 29 at 8:30 a.m. Eastern time (ET). You’ll be able to tune in at: http://investor.iridium.com

http://investor.iridium.com

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iRobot (NASDAQ: IRBT)

Snapshot:

iRobot is an American robotics company that serves the consumer, medical, enterprise, and military industries. iRobot’s product functions range from home cleaning to telecommunication to various military operations. iRobot currently generates the vast majority of its revenue from its Home Robotics division.

Updates:

Two big pieces of news for iRobot this month.

First, we have the reveal of the new Roomba 980 vacuum. The Roomba 980 is an advanced version of the company’s popular Roomba robot, which includes an adaptive navigation system, visual localization, and a cloud-based application controller. The biggest advancement here is that users can now control the robot from in or outside their home.

iRobot has also announced yet another win for its military robots, continuing what’s been a major surge in the company’s Defense and Security business over the last three months. This time, iRobot has been awarded two contracts from the U.S. Navy with a potential $96 million ceiling in total.

Specifically, these contracts are for support and production of iRobot’s MTRS MK1 robots pictured below, with work expected to be completed in 2016.

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Micron Technology Inc. (NASDAQ: MU)

Snapshot:

Micron is best known for producing many forms of semiconductor devices. This includes DRAM, SDRAM, flash memory, and SSDs. Its consumer products are marketed under the brands Crucial Technology and Lexar. The company was named one of the Thomson Reuters Top 100 Global Innovators in 2012 and 2013. It is ranked among the top-five semiconductor-producing companies in the world.

Updates:

It’s long been our thesis that the market was underpricing Micron and headwinds had already been well baked into the stock. Analyst estimates were so ugly that it was virtually impossible for Micron to disappoint, and fourth-quarter results certainly support this idea.

For Q4, Micron reported what look like ugly figures on their own: revenue fell 15% year-over-year to $3.6 billion, computing fell 31%, storage fell 6.5%, and DRAM pricing dropped 7%. Gross margin also slid to 27%, down from 33% a year prior.

But wouldn’t you know... since the call, Micron’s stock has rallied nearly 25%. Why? Because even with this very tepid quarter, the market has realized its previous fears were overblown.

Besides trouncing analyst estimates on the bottom line, Micron announced it will be shifting its capacity away from PC towards high-growth segments including mobile, automotive, and enterprise storage. With the main concern regarding Micron being declining PC sales, the market was more than happy to get some more color on the company’s impending pivot.

NXP Semiconductors N.V. (NASDAQ: NXPI)

Snapshot:

NXP specializes in near-field communication (NFC) technology. NFC allows for wireless communication between devices at very short distances with increased security. The technology is being used in public transport, event ticketing, home health care, patient identification, interactive museum exhibits, contactless credit cards, and as hotel keys, just to name a few markets.

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Updates:


Oceaneering International, Inc. (NYSE: OII)

Snapshot:

Oceaneering International provides engineering services and hardware primarily to customers operating in marine environments. The company’s services are marketed to oil and gas companies as well as the aerospace and construction industries. The company receives the bulk of its revenue from ROVs and Subsea Products.

Updates:

With oil prices now rebounding, Oceaneering has managed to rally off of August’s $37 low. The company will report third-quarter financial results on Wednesday, October 28 after market close, but don’t expect a bump on the income statement just yet.

As always, keep an eye out next issue for our take on the earnings call.

OPKO Health, Inc. (NYSE: OPK)

Snapshot:

OPKO Health is a mid-stage biotechnology development and medical diagnostics company. OPK has a deep drug candidate pipeline spanning from kidney disease to cancer treatments. It also provides a revolutionary diagnostic test known as the 4Kscore, used in prostate cancer screening. The company’s proprietary diagnostic technologies allow doctors to keep blood-based tests in house rather than outsourcing to outside laboratories.

Updates:

CEO Phillip Frost continues to load up on shares of OPKO following the company’s licensee Tesaro’s FDA approval of Rolapitant, a $1 billion annual market opportunity. Commercial launch is planned for the fourth quarter, with OPK receiving up to $110 million in milestone payments, plus double-digit royalties.

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Shares have taken a beating in recent months, but don’t let the price action fool you. With Frost still buying and a major product launch on the horizon, there’s not much reason to worry.

Rubicon Technology, Inc. (NASDAQ: RBCN)

Snapshot:

Rubicon is an electronic materials provider that develops, manufactures, and sells monocrystalline sapphire and other crystalline products for light-emitting diodes (LEDs), radio frequency-integrated circuits (RFICs), optoelectronics, and other optical applications. The company’s products include two- to six-inch sapphire cores for use in LED applications and into components, such as lens covers for mobile devices.

Updates:


Science Applications International Corporation (NYSE: SAIC)

Snapshot:

SAIC helps governments integrate technologies by providing full life-cycle services. This includes but is not limited to hardware engineering, program management, training and simulation, cloud computing services, software design, and logistics/supply chain support.

At its core, SAIC is a company that leases talent. The company has ~13,000 employees, 68% of whom are deployed to customer sites. Its value rests primarily in this talent base and the relationships it’s built with clients over the years.

Updates:

Shortly following our September issue, SAIC announced a buyback plan up to 5 million shares, which would represent a near 11% reduction in its current share count.

SAIC approved a similar 5 million share buyback program in 2013 and ended up repurchasing 3.5 million. Assuming the company does the same this time around, the program would amount to a 7.5% reduction in outstanding shares.

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The company has also declared a quarterly dividend of $0.35 a share. The dividend will be distributed on October 30 to shareholders of record on October 15.

Synaptics Inc. (NASDAQ: SYNA)

Snapshot:

Synaptics designs and manufactures human interface solutions for mobile computing, communication, and entertainment devices. Most notably, the company creates chips used for processing touchscreen movements in mobile devices. The company’s clients include Google (NASDAQ: GOOG), Amazon (NASDAQ: AMZN), Blackberry (NASDAQ: BBRY), Nokia (NYSE: NOK), Samsung (KSE: 005930), HTC, LG, and Sony.

Updates:

No company news or updates this issue, but keep an eye out for our take on first-quarter results next issue. Synaptics will release earnings and host a corresponding conference call on October 22, 5:00 ET. You’ll be able to access the call here: http://investor.shareholder.com/synaptics/

TCP International Holdings Ltd. (NYSE: TCPI)

Snapshot:

TCP sells LED lighting solutions for business and consumer markets. This includes Internet-connected lighting solutions that can be controlled straight from a smartphone. The value proposition for TCP and its technology is energy efficiency and savings through automation. The company should also benefit from its early positioning in the growing Internet of Things industry.

Updates:


http://investor.shareholder.com/synaptics/

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Vishay Intertechnology Inc. (NYSE: VSH)

Snapshot:

Vishay Intertechnology is the world’s number-one manufacturer of infrared optoelectronic components. The company offers a broad range of optoelectronic components (both visual and non-visual), including optocouplers, optical sensors, transceivers, LCD displays, infrared emitters, etc. Vishay targets a wide customer base across various industries including the automotive, aerospace, consumer, industrial robotics, telecommunications, renewable energy, medical, and computer hardware markets.

Updates:

For those still out of the loop, Vishay’s manufacturing facility in Tianjin, China became fully operational last month, and its product lines are back in operation. The factory had shut down following the Tianjin Port explosion on August 12.

Last issue, we told you Vishay would see a small hit on the quarter’s top line due to the temporary shutdown, and we now know just how big that will be: The company has revised third-quarter guidance to a much lower but tighter range of $558 million to $562 million, compared to prior guidance of $560 to $600 million.

Keep an eye out next month for our take on the earnings call.

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Technology Opportunity - media.angelnexus.commedia.angelnexus.com/pdf/tao/tao-october-2015-k0c.pdf · October 2015 Issue 6 Technology Opportunity & Following the recent descent of