Stock indices continue to break records, but, in contrast to the euphoria of the technology stock bubble of 1999, or the "irrational enthusiasm" of which then Federal Reserve chairman Alan Greenspan spoke in 1996, this time round, the rises are accompanied by several fears. Paradoxically, these fears fuel the rises. Cisco (CSCO), for example, would not have reached a multi-year peak after releasing reasonable results last week, were it not for the fears before the release that it would miss like all its rivals.
Cisco joined Microsoft (MSFT), which broke through its multi-year peak earlier in the month, just when it was being written off because of the collapse of the PC market. These two will shortly be joined by Intel (INTC), which has already corrected by more than 20% from the low of late 2012, to which it fell because of the PC market. Investors believe the message of new CEO Brian Krzanich, that, sooner or later, Intel will also be a significant player in the smartphone and tablet processor market.
Another stock that has reached a new peak is SanDisk Corporation (Nasdaq:SNDK), which is back at $60, which it last saw in the summer of 2007, before declining to a low of $5 in the crisis of 2008. CEO Sanjay Mehrotra took over the reins at the company from his co-founder Dr. Eli Harari two and a half years ago at a share price of $50. Only now, after rebuilding the company's senior management and outlining a new strategy, has he managed to bring the share price back to where it was six years ago.
SanDisk's senior management numbers fifteen people, only two of whom are Israeli, having come from M-Systems: senior vice president, OEM Marketing, and Israel country manager Dan Inbar, and Shuki Nir, senior vice president, corporate marketing and general manager of retail. Investors very much liked the company's strategy, as set out during a long analysts' day held at the company's US offices two weeks ago. The essence of the strategy is for the company to distance itself from the stigma of commodity chips, which has stuck to it for many years, and to focus solely on high-profit solutions.
SanDisk develops and sells only flash solutions, which carry a high gross profit margin, such as SSDs for the consumer and enterprise markets, or advanced built-in solutions for smartphones and tablets. Huge investments in expanding production lines in Japan have been frozen at least until the end of the year, and a cash mountain of more than $4 billion net will, in small part, be spent on complementary acquisitions, and more extensively on a share buyback program, which could reach around $900 million this year, compared with just $230 million last year.
In my view, the share price will continue to rise, because earnings per share will grow substantially thanks to a triple following wind. More products will be sold with higher gross margins, there will be fewer shares as buybacks are stepped up, while the third factor, which has lately affected SanDisk considerably, as it has every other manufacturer in Japan, is the collapse of the yen against the US dollar.
Something went badly wrong at tiny company Attunity Inc. (Bulletin Board: ATTUF) in the first quarter, mainly a plunge in sales and a slide back into loss. This is despite the fact that the company operates in today's hottest IT markets Big Data and cloud computing and despite the fact that it has OEM agreements with several giants of the sector.
Early in the month, Attunity's share lost half the value at which it was traded last summer, and CEO Shimon Alon is again battling to get it back quickly on a profitable track, and at the same time to bring back investors, who have abandoned the share in droves.
After restructuring Attunity's marketing network, and signing new agreements, Alon took the kind of personal step one does not often come across in a manager of a company with a collapsing share price. Alon put his money where his mouth is, and announced an agreement with Morgan Stanley for a blind purchase of an undisclosed quantity of shares, at undisclosed prices.
The purchase will start next week, and continue until the end of the year. Alon currently has a 13.5% stake in the company, part of which he bought four years ago, at the height of the previous crisis, and at a tenth of today's price (after adjusting for a reverse split).
Attunity has agreements with Microsoft, HP (HPQ), IBM, Oracle (ORCL), Amazon (AMZN), Teradata (TDC), and others, and on the day of the financials it announced a new distribution agreement with a Fortune 50 IT company. By process of elimination, I arrive at Dell (DELL).
For these agreements to trickle through into the sales line, Attunity needs more time, and more salespeople in the field, and indeed, in the past few months, it has been hiring. We should see the results in the second half of the year.
Published by Globes [online], Israel business news - www.globes-online.com - on May 20, 2013
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