Gadgets will be trumps for the rest of the Wall Street trading week. The 2006 International Consumer Electronics Show (CES), the world’s largest exhibition in the sector, opens on Thursday in Las Vegas. All the major consumer electronics players will be there. From tomorrow through Friday, a lot of companies, small and large, are expected to issue announcements about new products.
Among the giant companies, Intel (Nasdaq: INTC) will announce its strategic entry into the electronic components field, accompanied by the launch of new products, with an emphasis on the digital home. New Intel CEO Paul Otellini is leading the change. A year ago, he recruited senior VP and chief marketing officer Eric Kim, a manager of South Korean origin, for the task. Kim engineered a similar revolution at another giant, Samsung Electronics Co. Ltd., with great success. Samsung is making hay in two areas in which Intel also wants to succeed, although only as a supplier of components, electronics products, and chips.
It was no easy matter for Otellini to push through the change in Intel’s strategy. He had to convince his predecessors, quasi-legendary figures at Intel like chairman and former CEO Craig Barret and former chairman Andy Grove, that it was necessary. He also demanded that they give up the historic Intel Inside logo that accompanied their personal success as Intel managers. For Otellini, this logo symbolizes Intel’s imprisonment in the computer industry.
It’s now clear to everybody that the computer is no longer as dominant as it once was; it must contend with other surfing and communications devices, such as smart cellular telephones, digital televisions (just around the corner), and even all sorts of mobile entertainment platforms for listening to music, watching videos, and playing video games. The option of high-speed Internet surfing is either already available to everyone, or will be so soon.
In addition to Intel, Cisco Systems (Nasdaq: CSCO) will also feature its developing foothold in the digital home sector through its Linksys subsidiary, without mentioning its acquisition of digital set-top boxes company Scientific Atlanta (NYSE: SFA). As he does every year in Las Vegas, Microsoft (Nasdaq: MSFT) chairman Bill Gates will launch new products by his company and its partners.
Among Israeli companies, I expect news from Marvell Technology Group (Nasdaq: MRVL), SanDisk Corp. (Nasdaq: SNDK), M-Systems Flash Disk Pioneers (Nasdaq: FLSH), Zoran Microelectronics (Nasdaq: ZRAN), DSP Group (Nasdaq: DSPG), and Metalink (Nasdaq: MTLK;TASE: MTLK).
Check Point and Syneron: Profit warnings?
Together with good news from this important exhibition, some bad news is also liable to emerge from this short trading week -- profit warnings for the fourth quarter. Last week, this threat was removed from Radware (Nasdaq: RDWR; TASE: RDWR) and Orckit Communications (Nasdaq: ORCT; TASE: ORCT), which released publication dates for their reports. I’m also confident that no profit warnings will come from M-Systems or SanDisk, since business is booming in the flash chip industry.
In a departure from its usually practice, Orckit will publish its report very late -- in the last week of February, instead of in January, as it did last year. It seems to me that, before publishing new guidelines for 2006, Orckit’s managers want to brush up on the plans of their largest customer, KDDI Corporation (TSE: 9433), which will publish its results for the December quarter, the third in KDDI’s fiscal year, and may also update its deployment plans for the current year at the same time.
I sense a large probability that Syneron Medical Ltd. (Nasdaq: ELOS) will issue a profit warning. Friday’s 11% plunge in the share was due to a downgraded recommendation from CIBC, which fears that the company will miss its sales target. In a "Globes" interview on Sunday, acting Syneron Medical chairman Dr. Shimon Eckhouse declined to comment on the quarter, claiming that the figures had not yet been collected. This claim seems odd to me in the computer era, and constitutes at least an indication that the quarter is borderline, with the company scrambling to get its distributors to up their sales figures. In addition, a sentence like, “I’m here to build value for investors in the long term,” usually hints at a problem in the short term.
Synernon’s share began its slide from a peak of $46 on December 13, accompanied by a large trading volume. At the time, the fall in the share was attributed to a downgraded recommendation by CNBC guru James Cramer, who told investors to take some of their large profits in the share off the table, because, as he puts it: "Bulls make money. Bears make money. Pigs get slaughtered." The share indeed shed 32% of its peak value, but I suspect that, even then, the fall was due to problems with the company’s quarterly results, not just what Cramer said.
Cramer also recommended switching to the share of a competitor just after its IPO, and similar recommendations of his for other shares did not cause such a sharp response. After all, he didn’t say anything bad about Syneron for either the short or long term; he only repeated his investment philosophy, which advocates taking some of the profits gained from a rising share.
A second candidate of mine for a profit warning is Check Point (Nasdaq: CHKP), because CEO Gil Shwed himself said a month ago that management wouldn’t know whether it would meet its guidelines until the final day of the quarter. Yesterday morning, Shwed, whom I believe has many more distributors than Eckhouse, already knew the answer. We investors will know today or tomorrow, because the company will either publish an official profit warning, or it will release the publication date for its report, which is considered a reliable sign to investors that the company has at least met its own guidance range.
Finally, I have added Eltek (Nasdaq: ELTK) to my investment portfolio.
Published by Globes [online] - www.globes.co.il - on January 3, 2006