Spansion: Sees Chapter 11 Exit Soon; Current Shares To Expire Worthless; Stock Drops 48%

Spansion (SPSNQ.PK) shareholders today got the definitive word: their stock is worth nothing.

In a filing with the SEC today, the NOR flash memory chip company provided details on a reorganization plan which would allow the company to exit Chapter 11 bankruptcy protection in the fourth quarter of this year or early in 2011.

For holders of the common stock, the most important line in the lengthy filing is this one:

“Current holders of shares of the Company’s common stock will have their shares canceled and will receive no consideration under the terms of the Draft Plan of Reorganization.”

Ergo, Spansion shares today made the first half of their trip to zero, falling 17.65 cents, or 47.8%, to 19.25 cents. At this point, if Spansion holders can find someone to sell shares to at 17.65 cents, they should take what’s left of their money and run.

Report: Solar Stocks’ Aggressive Accounting Raises Red Flags

The solar technology industry may report a stronger-than-expected third quarter but could face disappointment in subsequent quarters, warns Hapoalim Securities analyst Gordon Johnson in a note to clients today. Johnson says that his checks suggest demand for photovoltaic modules in Germany has been better than expected, raising the prospect that solar tech makers could demonstrate better sales growth and margins than expiated when they report the September quarter.

The longer term quality of the industry’s growth may be questionable, however. When growth slows for industries, notes Johnson, the participants often resort to what he calls financial chicanery to hide the slowdown, and that’s what he expects from solar tech companies.

Among the trends that Johnson cites is questions revenue trends, as when companies’ cash flow from operations is less than net income for multiple quarters. He notes this is the case for First Solar (FSLR), which has reported smaller cash flow from operations compared to net income for the last two quarters after cash flow exceeding net income prior to that. Suntech Power Holdings (STP), similarly, has generated less cash from operations than net income for 11 of the last 12 quarters. Both may be guilty of “aggressive revenue recognition,” Johnson warns. SunPower’s (SPWRA) cash flow has been $7 million less than net income, on average, since the company’s inception, which is below the group average of cash flow $5 million above net income.

Other factors include days of sales in inventory, which at 135 at the end of the second quarter, suggests the industry still has way more inventory on hand than on average, which could be hard to burn off and could hit margins for all companies. What’s more, a number of solar companies may be guilty of having allowances for doubtful accounts that are too low or for having written down the value of inventories too little even as the value of solar modules has decreased and as companies are extending greater credit to customers, calling into question their accounts receivable. First Solar’s accounts receivable swelled in the latest reported quarter, a fact that does not escape Johnson’s notice.

Johnson has an “Underperform” rating on the entire solar industry based on these apparent “aggressive” accounting policies.

Johnson’s note includes the disclosure that Hapoalim does not make a market in the solar stocks mentioned.

Analysts Positive on Cisco-Tandberg; Worries Abound for Polycom

Analysts are still combing through the implications of Cisco Systems’s (CSCO) announcement yesterday it will spend $3 billion to buy Tandberg, a Norwegian maker of video-conferencing systems.

Catherine Trebnick with Avian Securities: The deal vaults Cisco to number one in video conferencing, with a greater-than-40% share of the market where Cisco previously had a minor share. The deal is positive as it will advance Cisco’s stated goal of focusing on video products for business uses. Trebnick thinks there’s now an increased chance that Hewlett-Packard (HPQ) will go after Polycom (PLCM).

Jason Ader, William Blair & Co.: the deal is a long-term negative for Polycom, with 30% share versus the combined companies’ 40% share. However, in the near term, the perceived scarcity value of Polycom, and the distractions that will ensue at Tandberg, could be a plus for the company. Down the road, Cisco may throw in video for free with networking and server equipment sales, a big negative for Polycom, he writes. Ader maintains a “Market Perform” rating on Polycom shares.

Mark McKechnie, Broadpoint/Amtech: the deal makes strategic and financial sense, writes McKechnie. It was paid for with some of the nearly $29 billion stockpile of cash Cisco has domiciled overseas to avoid taxes, and it should be accretive by about 2 cents per share in the July, 2011 fiscal year, he writes. Further, Tandberg’s share of video conference among small- and mid-size business customers is higher than overall, probably on the order of 50%, he writes. He thinks Cisco can help raise Tandberg’s operating profit margin to the mid- to hi-20%, versus the current low 20% rate at Tandberg. By making sure Cisco’s own video conferencing is interoperable with Tandberg’s, Cisco removes a roadblock for its own products.

Brent Bracelin, Pacific Crest Securities: The deal gives Cisco an end-to-end portfolio of video products “from the desktop to the boardroom,” writes Bracelin. As the company weaves video into so-called unified communications products, Cisco could take a larger share of IT spending. Bracelin maintains a $30 price target on Cisco shares and rates them “Outperform.”

Palm Call Volume Rising; Oct 18 Calls in Focus

Maybe somebody thinks something good is in store for smartphone maker Palm (PALM). Or maybe it’s just a blip. Volume of call options on shares of Palm was on the rise this afternoon, reports, with 28,100 calls to 3,600 puts, most notably the Oct 18 calls, of which Briefing notes that volume was at 9,160, with open interest of 23,400, and implied volatility of ~67%, up from yesterday’s implied volatility of 61%.

Barclay’s Raises eBay Target to $24

EBay’s (EBAY) main auction business is stabilizing, though that’s no cause for celebration, according Barclay’s Capital analyst Doug Anmuth, who today raised estimates for this year and next for EPS and raised his price target from $24 to $20 based while maintaining a “Neutral” rating on the stock.

Anmuth believes eBay is making progress in turning around the auction business through recently introduced changes such as giving greater assistance to “high-quality sellers,” improving product page listings, and giving some free shipping. He projects the total purchase “gross merchandise volume transacted in eBay’s “Marketplace” will be flat this quarter versus last year, an improvement from the 1% decline last quarter. He raise his 2009 and 2010 EPS estimates to $1.58 and $1.74, from $1.57 and $1.64, and thinks the Street is too low at $1.51 and $1.63.

In order to move to a “Buy,” Anmuth wants to see that the company can reach $2 in EPS, excluding some costs, in 2011, something he’s not convinced of yet.

eBay shares today closed down 56 cents, or 2.4%, at $22.68.

August Chip Sales Up 5% on Restock

A global re-stock of chip inventories led to a 5% rise in chip sales in August, the Semiconductor Industry Association, a trade body, reported today. The rise from July to August of 5%, to $19.1 billion, is a slight decline from the 5.3% rise from June to July. Year over year, sales declined 16.1%.

The question, of course, is what this portends for the full September-ending quarter for the industry and for the year. The rolling three-month-average of sales for June, July and August is up 14.7% from the prior three months, and research firm iSuppli estimates based on today’s SIA data that September quarter sales will be up 10.6% from the June quarter.

For the full year, both SIA and iSuppli see an improvement from prior forecasts, with total sales for the year to date down 21.3% versus the 25% average through the first six months of the year. iSuppli projects that chip sales will decline 16.5%, better than the firm’s prior estimate of a 23% decline.

As I noted in an earlier post on Samsung (005930.KS), there is concern some the inventory re-stocking that’s been lifting chip sales may be in excess of actual PC and gadget demand. iSuppli notes that three percentage points of the quarter-to-quarter increase for Q3 may be based on inventory re-stocking in excess of demand.

Chips stocks as measured by the Semiconductors HLDRs exchange-traded fund (^XSH) fell 7 cents, a fraction of a percent, to $24.56.

Palm Pixi On Sale Oct. 20?

The Boy Genius Report this morning quotes a new source as saying Palm’s (PALM) follow-on smartphone with the Web OS operating system, the Palm “Pixi,” will go on sale October 20th at Sprint (S), as well as Best Buy (BBY) stores. The site says it talked with a new source it’s not used before, but that the “sounds right.” My impression of the Pixie, from a brief hands-on last month, is that it’s a slimmer “Pre” with a tiny screen, and not really much to write home about. It will be interesting to see how it fares.

Palm shares today are down 21 cents, or 1.3%, at $16.39.

EMC: Amtech Raises Target on Rising Margins

Broadpoint/Amtech hardware analyst Brian Marshall this morning raised his estimates for storage equipment vendor EMC (EMC) for the calendar 2010, while adding the company probably had a “solid” september quarter and a has an “extremely robust” outlook for the current quarter. Marshall reiterated a “Buy” rating on the stock and raised his price target to $21 from $19.

EMC has “definitely turned the corner” in sales to corporate IT, writes Marshall, and the current quarter may see a return to sales growth. He adds the company’s stake in VMWare (VMW) is of an importance that “cannot be restated” as it is the “single most compelling story” in the rebound in IT spending. His earnings expectations, furthermore, are going up based on the notion that the acquisition of storage software maker DDUP is going to boost gross profit margin by 2 percentage points next year.

Marshall raised his estimate for 2010 to $1.15 in EPS from $1.10, and raised his revenue estimate by $300 million to $15.5 billion.

EMC shares are up 12 cents, or .7%, at $16.63.

Avian Sees Samsung Phone Overbuild; Inventory Risks Increase for Wireless Chips

More discussion on the Street today about how Samsung Electronics (005930.KS), the second-largest cell phone maker in the world after Nokia (NOK), may have dangerously overbuilt its phone inventory in the third quarter, causing trouble for chip vendors, as Eric discussed yesterday.

Avian Securities analyst Avi Cohen today writes that his “checks” indicate “Samsung has in fact been very aggressive with the supply chain.” Samsung apparently told one chip vendor last quarter it was planning for shipments of 60 million to 80 million handsets in the quarter, suggesting the company has been expecting shipment growth of 15% to 23% this quarter. That kind of growth is unlikely to happen, suggests Cohen, as Samsung’s many phone introductions last quarter appear lackluster and undesirable, suggesting the company will have weaker sales than earlier this year. This is a problem for wireless chip makers, Skyworks Solutions (SWKS), Qualcomm (QCOM), RF Micro Devices (RFMD). “The net of this is: with Samsung very aggressive in the supply chain while sell-through share appears to be declining from elevated levels, we could in fact be seeing a set-up where Samsung has to aggressively reign in builds/component ordering in 4Q09.”

Samsung’s ordinary shares on the Korea exchange fell 3%, while shares of Skyworks, Qualcomm and RF Micro were down between 1 and 2% today.

Apple: Services Take Center Stage, Says UBS, Raises to Buy

Hot on the heels of yesterday’s estimate increases for Apple () from Merrill Lynch and Oppenheimer, UBS Securities analyst Maynard Um today raised his rating on Apple from “Neutral” to “Buy” with a $265 target, up from $170.

The most interesting point of Um’s upgrade is that he believes Apple may extend its reach into services for various devices, primarily for delivering content to the iPhone and Macs, and for facilitating integration of Apple devices with social networking services. Um notes Apple’s capital expenditures have risen from $128 million in the year ending September of 2005 to $702 million in 2008 and $804 million this fiscal year. It would be network operations center, rather like Research in Motion’s (RIMM) oft-touted delivery network, that would “we hypothesize will be the foundation for a service that provides seamless access and mobility of digital content across all its products, at any time, and from any place. Similar to Research In Motion’s, the NOC may also help to reduce network congestion through techniques such as compression & push.”

Um sees visibility into iPhone shipments improving with new partnerships, including the Vodafone (VOD) and France Telecom’s (FTE) Orange deals for the U.K. disclosed last week and this week, and he sees Apple margins perhaps getting a boost from a greater mix of iPhones and Macs in the company’s sales versus the lower-margin iPod. Um thinks the Street is too negative about Apple margins, projecting them to be flat or down this fiscal year from last year.

On a related note, Kaufman Brothers analyst Shaw Wu raises his price target on Apple to $214 from $184 on what he believes is strong demand for the new iPod Nano plus video, and some margin assistance from strong sales of Apple’s Snow Leopard operating system, which came out in early September. Wu raised his estimates for this quarter from $8.9 billion in revenue and $1.29 in EPS to $9.1 billion and $1.41.

Apple shares today are up $4.05, or 2.3%, at $184.91.

Update: No, Is Not Being Acquired By Microsoft; Second Fake News Release This Week (LOCM) announced this morning that, contrary to a false press release that has appear online, it is not being acquired by Microsoft (MSFT).

The full statement: Corporation today commented that a false press release was issued that stated was being acquired by Microsoft. The company has not been acquired, nor is it in discussions with Microsoft about a potential acquisition.

Here is a copy of the fake release.

LOCM shares rose 37 cents to $5.76 in after-hours trading last night, and traded as high as $9.65.

This is the second instance this week of a fake release moving stock prices; a similar incident recently briefly drove up shares of Imax.

Update: Steve Simon, CEO of the SS|PR, the firm whose name appears on the press release, emailed Tech Trader daily to add, “I just want to let you know, that I am investigating the situation to determine who falsely used my agency name on the release. I have never heard of and any legitimate news would come from PRNewswire or Businesswire.” More details as they appear.

Updated Update: After some sleuthing, Mr. Simon informs TTD that the source of the fake release,, is HQ’d in Rotterdam, Holland, but hosted in by a firm in Culver Cit, California, which he thinks should allow the site to be shut down. Mr. Simon draws his info from a standard “WHOIS” search:

Standard Micro Posts Beat-and-Raise FY Q2

Standard Microsystems (SMSC) reported revenue for its fiscal second quarter ended August 31 of $75.1 million off 23% year over year, but up 20% sequentially, and ahead of the Street at $72 million. The company posted a non-GAAP profit for the quarter of 8 cents a share; the Street had expected a break-even quarter.

For the third quarter, the analog and mixed-signal chip company sees revenue of $82 million to $86 million, and non-GAAP profits of 19-24 cents a share; the Street has been expecting $81.5 million and 20 cents.

In late trading, SMSC is up 26 cents, at $23.10.

Corel Posts A Mixed FY Q3

Corel (CREL) this afternoon posted revenue for its fiscal third quarter ended August 31of $47.4 million, down from $66.2 million a year ago, and slightly the single estimate carried by Thomson First Call of $48.5 million. But the Ottawa-based software provider reported profits for the quarter of 27 cents a share, down from 39 cents a year ago, but above the single estimate at 18 cents.

In late trading, CREL is down 2 cents, at $2.90.

Accenture FY Q4 In Line; But Stock Falls On Light Guidance

Accenture (ACN) shares are losing ground in late trading on disappointing guidance for both the fiscal first quarter ending November and for the August 2010 fiscal year.

For the fiscal fourth quarter ended August 2009, the IT services company posed revenue of $5.15 billion and diluted EPS before a restructuring charge of 63 cents; the Street had been looking for $5.14 billion and 63 cents.

For the November quarter, the company sees revenue of $5.3 billion to $5.5 billion, a bit below the Street at $5.54 billion.

For all of FY 2010, Accenture sees revenue ranging from down 3% to up 1%; that implies $20.9 billion to $21.8 billion, which is slightly below the previous consensus of $21.99 billion. The company sees EPS for the year of $2.64 to $2.72, below the Street at $2.77.

Accenture also declared an annual dividend of 75 cents, up from 50 cents last year; it also intends to switch to a semi-annual dividend schedule starting in Q3 of FY 2010. The company also said its board has approved an additional $4 billion share repurchase authorization.

In late trading, ACN is down 81 cents, or 2.2%, to $35.72.

Update: New Theory On Comcast/NBC

Here’s a new twist on the chatter on Comcast (CMCSA) talks to buy a chunk of NBC Universal, from CNBC’s David Fa ber.

Faber says that the current discussions between the two sides would have Comcast take a 51% stake in a new company formed by combining NBC Universal with Comcast’s own cable properties, which include E!, the Golf Channel and various regional sports networks. General Electric (GE), which owns 80% of NBC Universal, would have a 49% stake in the new company. GE would buy Vivendi’s 20% stake in NBCU, and then include the debt used to make the purchase on the books of the new company.

Comcast would not issue any new equity to do the deal, but it would shell out about $7 billion in cash in addition to those cable properties to pay for its stake.

Faber says his sources say no deal is imminent.

Let’s go to the video tape:

FT techtalk – a new Wave of conversation?

Google Wave has been all the talk this week, with the instant-messaging on steroids collaboration tool - yes, we know that’s a gross oversimplification - expanding its reach to 100,000 beta testers. If you failed to receive an invite, we can offer you a part in a much more modest beta launching on Friday. FT techtalk, using [...]

Warning To PC Refresh Cycle Believers: Average PC Not As Old As You Think

One of the tech sector’s great hopes is that sometime in 2010, there will be a major PC refresh cycle, driven in part by by the arrival of Microsoft (MSFT) Windows 7, new Intel (INTC) processors but even more by the general perception that the installed base of PCs is rapidly aging. The conventional wisdom is that the average PC is about five years old.

But what if that’s wrong? Microsoft has been stressing that Windows 7 actually has lower hardware requirements than Vista, the bulky piece of code it replaces. Given still-tight corporate IT budgets, the much discussed  refresh cycle could be delayed, which would be bad news for anyone anticipating a major pick-up in PC demand next year.

Daniel Berenbaum, the chip analyst at Auriga USA, took at a look at this question and came up with a surprising answer. Berenbaum started with data on all desktop and laptop PCs sold since 2000, and attempted to calculate the true average age of the installed base, using a range of theories on what percentage of each year’s production is still in service. His conclusion: even under conservative estimates, the conventional wisdom is off base.

Even if you assume that every one of the PCs sold since 2000 is still in service - which clearly is not the case - you find the average age of PCs in service to be 4.2 years. With a slightly more conservative stance - assume 100% survival of all PCs since 2005, at least 50% of those from previous years - the number drops to 3.8. Bring your assumptions down to more rational levels, and the number drops to 3 years or less.

One reason for this: the number of PCs has grown steadily over the last decade, from 145 million units in 2000 to a peak of 292 million in 2008. (His guess for this year is 285 million.) From 2000-2004, PCs sold totaled 783 million; for the 2005-2009 period, the total is 1.284 billion.

Ergo, Berenbaum’s view is that a widespread refresh cycle - particularly in the corporate sector - is unlikely.

BMC Software: J.P. Morgan Downgrades

BMC Software (BMC) shares are taking a hit today after J.P. Morgan analyst John DiFucci cut his rating on the mainframe software vendor’s stock to Underweight from Neutral, setting a price target of $30, well below yesterday’s close at $37.53.

DiFucci says the stock’s valuation implies “material improvement in operations” is coming, and he contends that is not likely. Risk in the shares, he says, now outweigh potential rewards. “We expect the surprisingly weak long-term free cash flow characteristics of BMC to persist, even with the much anticipated mainframe software renewal cycle that is expected this year,” he writes.

DiFucci also contends that the company’s guidance for the March 2010 fiscal year “could be at risk,” since it is predicated upon an improving software spending environment. He also says an acquisition of the company at or even meaningfully below current levels is “unlikely.”

BMC today is down $1.44, or 3.8%, to $36.09.

Samsung Inventory Build Poses Risk To Handset Chip Stocks, Analyst Says

Fourth-quarter financial results at the semiconductor handset companies could disappointment as Samsung sharply slows down mobile phone production, according to Thomas Weisel Partners analyst Tore Svanberg.

Svanberg notes that Samsung - the world’s #2 handset producer, behind Nokia (NOK) - typically slows component orders in the final weeks of each calendar year to reduce inventory. He says that while each year is different, on average build rates drop 10%-15% sequentially in the December quarter. This year, with the global economy still struggling and consumer spending health uncertain, he thinks Samsung could have excess component inventory - and therefore may substantially reduce Q4 component purchases. He thinks the company’s build rate in the quarter could be down 20%-25% from Q3 levels.

Svanberg adds that any weakening of consumer sentiment and spending at a time when handset makers are rolling out many new model could translate to excess inventory after the holidays. Ergo, he thinks the analog chip companies that supply the handset makers could be headed for lower-than-expected Q4 results.

In particular, he singles out three stocks as particularly vulnerable: Advanced Analogic (AATI), with 38% of revenue from Samsung, and 70% of overall revenue from handsets; RF Micro Devices (RFMD), with 75% handset exposure, including 10%-plus to Samsung, and Skyworks (SWKS), with 75%-80% handset exposure, and 10%-15% from Samsung.

Svanberg says other chipmakers with more modest exposure to this issue include Intersil (ISIL), National Semicondutor (NSM), Micrel (MCRL), Maxim Integrated Products (MXIM) and Silicon Labs (SLAB).

In today’s trading:

  • AATI is down 15 cents, or 3.8%, to $3.82.
  • RFMD is down 49 cents, or 9%, to $4.94.
  • SWKS is down 63 cents, or 4.8%, to $12.61.
  • ISIL is down 97 cents, or 6.3%, to $14.34.
  • NSM is down 82 cents, or 5.8%, to $13.45.
  • MCRL is down 33 cents, or 4.1%, to $7.82.
  • MXIM is down 63 cents, or 3.5%, to $17.51.
  • SLAB is down $1.31, or 2.8%, to $45.05,

Polycom: Wells Fargo Downgrades On Cisco Threat

For Polycom (PLCM), there are two schools of thinking on how the company will be affected by the news that Cisco (CSCO) will spend $3 billion to buy Tandberg, Polycom’s chief rival in the video conferencing business. On the one hand, it gives PLCM scarcity value, as the only real pure play in the sector, and the obvious place to turn for any customers who don’t want to turn to Cisco. But on the other hand, their chief competitor morphs from Norway-based Tandberg to networking giant Cisco. And that could be a bit of a problem.

Wells Fargo analyst Jess Lubert this morning downgraded the stock to Market Perform from Outperform, with a new target price range of $27-$29, down from $29-$32. Lubert writes that while the deal is likely to create some near-term opportunities for Polycom, Cisco’s move looms “as a meaningful threat to Polycom’s market share.”

Already the market leader, Tandberg now becomes a more formidable foe, Lubert contends. “The purchase of Tandberg would immediately make Cisco the market share leader in video endpoints and network systems,” the analyst writes. “However, given Cisco’s impressive channel, balance sheet and ability to integrate Tandberg’s video conferencing endpoints with its infrastructure and unified communications platforms, we think the combined entity is likely to extends its share upon closure of the deal.”

Raymond James analyst Todd Koffman notes that while Tandberg has historically outperformed Polycom from a growth, share and profitability perspective, it recently has rolled out new products that make it more competitive; he wonders if maybe Cisco is buying the wrong company. He contends PLCM “may be at a positive inflection point in the video marketplace,” and repeats his Outperform rating.

Meanwhile, Jefferies analyst William Choi says he does not expect a takeover bid for Polycom in the near-term. He says Avaya and Hewlett-Packard have previously been considered possible suitors, but that Avaya has its hands full with the recent purchase of Nortel’s IP telephony assets, and that HP has gained little traction in telepresence, and seems more focused on the data center. Choi maintains his Hold rating, and says that “competition is even more intensified” with Cisco buying Tandberg.

PLCM today is down 41 cents, or 1.5%, to $26.34.