|Shares Out. (in M):||24||P/E||0.0x||0.0x|
|Market Cap (in $M):||192||P/FCF||0.0x||0.0x|
|Net Debt (in $M):||-120||EBIT||18||20|
Audience, Inc. (Nasdaq: ADNC), the clear market and IP leader in advanced voice and audio processing for mobile devices, is a severely broken May 2012 IPO that has been left for dead by investors after the company announced on September 6th that its technology would not be incorporated in the iPhone 5. As a result, Audience, which priced its IPO at $17.00 on May 11th and traded as high as $23.41 on June 15th, fell to the mid-single digits on the AAPL news. As a result, ADNC shares are now a value investor’s delight, as it is dirt cheap, despised and left for dead, yet the company is running on all cylinders with strong momentum (really! despite AAPL!). With a market cap of $192mm using 23.6mm fully diluted shares, after subtracting $120mm of cash & marketable securities ($5.08/share or 63% of the share price is net cash), the TEV is only $72mm and TBV is $5.91/share, providing great downside support at this depressed level. The street is currently modeling $150-160mm of sales, $80mm of gross profit and $12mm of EBITDA for 2013 (implying <0.5x TEV/Sales, <1.0x TEV/GP and 6.0x TEV/EBITDA) – and I expect these operating estimates too prove far too low given the enormous success of Samsung’s flagship products (Galaxy S III, Galaxy Note II, Google Nexus 10 tablet), big new design wins and new product categories that will be revenue generative in 2013. Based on the faster than expected uptake into new OEMs and channels (PCs, Automobiles, TV), I believe that 2013 EBITDA meets or exceeds 2012 results, implying a TEV/2013 EBITDA of a remarkably low 3.6-4.0x with strong out-year growth and leading strategic patent assets. Watch here to understand the Audience technology and how it works: http://www.audience.com/experience
I expect that within 12 months ADNC will trade for at least 2-3x its current price, and I believe there is a very high probability that the company is acquired by Intel, Google or QUALCOMM due to its mission-critical IP and the fact that 3 venture funds own 60% of the stock and will need to exit. Further adding to our confidence is the fact that the company’s head of engineering bought nearly $800,000 worth of stock (100,000 shares) in the open market at prices ranging from $7.21-8.48 from November 2-16. ADNC is presenting at the Credit Suisse conference at 12:30 ET this Wednesday, which should bring additional positive attention to the story in the near-term (live webcast here: http://investor.audience.com/). There are multiple potential catalysts for near-term (next 3 months) value realization here, as described herein.
Keys to the story are as follows:
While it’s unclear why AAPL chose to go with its own beam-forming technology for the iPhone 5, Audience technology has consistently beaten it in the marketplace as Apple’s technology has exhibited the following problems (again, discussed on the Q3 conf call):
A critical question is how strong Audience’s relationship with Samsung is, given that Sammy represented 55% of ADNC’s Q3 sales (this should decline significantly due to ramp with new customers and product channels in late 2012 and 2013). Audience CEO clearly stated on the Q3 call that the Samsung relationship was very strong, and he listed three structural reasons why Sammy would not leave Audience, aside from the best-in-class tech that Audience offers:
Note 1: Interestingly, the transcript for the company's Q3 call is not readily available. I would highly recommend listening to the call itself, as we believe the CEO's tone in certain comments is quite telling. The link is here: http://investor.audience.com/eventdetail.cfm?eventid=119596
Note 2: It was released today in the proxy that there is a proposal to exchange 1.9mm options with an average exercise price of $12.07 for 1.8mm new options struck at the closing price as of the date of the exchange offer while resetting the vesting schedule. While option repricing is never ideal, it is probably reasonable in order to retain key employees and maintain morale given the company's strong momentum and share price movement due to AAPL. The 23.6mm fully diluted sharecount used above is the company's estimate for Q4.
Note 3: Having recently upgraded from a Samsung Galaxy S II to the Galaxy Note II (an Audience product), the difference is incredible even to an untrained ear. The example in the video on the company's website is accurate in my assessment.
|Entry||11/26/2012 10:16 PM|
thanks for the interesting idea. a couple of questions:
1. any insights as to whether the company tried to sell itself before the IPO?
2. what does the company want to do with the cash? Risk of M&A? Why didn't they announce a buyback as part of the Q3 earning announcement?
|Entry||01/23/2013 02:12 PM|
Any insights as to why the stock is down 6% today? thanks.
|Subject||RE: RE: stock price|
|Entry||01/23/2013 02:53 PM|
I love this idea. Thanks.
My 2 cents:
I think the platform guys like Google and Samsung (or Apple, even if they re-adopt technology) are unlikely acquirers because of the conflict with customers. I do think the chip guys like Nvidia, Nuance, or Qualcomm or a Dolby would be interested acquirers.
|Subject||RE: RE: RE: stock price|
|Entry||01/23/2013 02:56 PM|
Straw - Thanks. I tend to agree, but in a world where GOOG bought MOT for the patents, I wouldn't rule them out. As the JPM analyst said, given importance of ASR (automated speech recognition) to the technology of the future, this is far more than just a chip business.
|Subject||Samsung, Xiaomi, ZTE, Apple|
|Entry||01/25/2013 07:53 AM|
Interesting article out this morning that directly pertains to ADNC:
Engadget: "Samsung extends lead over Apple in smartphone marketshare, while Huawei and ZTE increase influence." (Link: http://www.engadget.com/2013/01/25/idc-samsung-extends-lead-over-apple-q4-2012-smartphones/)
IDC: "Strong Demand for Smartphones and Heated Vendor Competition Characterize the Worldwide Mobile Phone Market at the End of 2012" (Link: http://www.idc.com/getdoc.jsp?containerId=prUS23916413#.UQJ_xr_C0pi)
-- Notably, Huawei bumped LG out of the top 5 and is now the #3 smartphone vendor in the world, as apparently China "can't get enough" of their phones.
-- Estimated Q4 unit shipments of 63.7mm for Sammy, 47.8mm for Apple, 10.8mm for Huawei, 9.8mm for Sony and 9.5mm for ZTE.
-- Note that Sammy, Huawei and ZTE are all customers of ADNC.
|Entry||01/31/2013 04:48 PM|
Nice call, not only the result but your thesis
|Entry||01/31/2013 10:06 PM|
thanks for the great idea.
|Subject||DB - Damning with faint praise|
|Entry||02/01/2013 09:29 AM|
The DB "upgrade" to neutral has what I'd almost consider trash talk. Bizarro. Maybe it should be analysts and women scorned which hell hath no fury of...
|Entry||02/01/2013 09:35 AM|
Thanks, guys. I'd like one of these every January...
I will say that you have to hand it to this management team for executing like pros in the face of serious adversity.
JPM now looking for $186mm of CY13 sales. If ADNC is sold to a strategic $16 will look like peanuts in retrospect.
Obviously risk/reward has changed dramatically with the stock almost 100% higher than it was 9 weeks ago, so probably prudent to take some chips off.
Hope you all made a few bucks.
|Subject||RE: RE: Congrats|
|Entry||02/01/2013 11:25 AM|
once again, great call and thanks.
|Subject||RE: RE: RE: RE: RE: Nice market we have here|
|Entry||02/19/2013 10:15 AM|
where do you see this?
|Entry||03/06/2013 10:29 AM|
Great idea, compelling as all get out, but one of the "nastiest" trading stocks (Twitter manipulation, etc.) I have ever seen. Truly. Even taking into account its market cap, this thing flash crashes and rallies more in a month than anything else I've ever observed. Not sure if it is a day trader's delight, or just sloppy/stupid owners.
|Subject||Great update...Thank you|
|Entry||03/06/2013 11:44 AM|
Thanks Cuyler. I hope to be on the JPM call. Thank you for the quick and thorough update.
|Subject||RE: CFO bot 50k more shares yesterday...|
|Entry||03/08/2013 02:48 PM|
I love it when the CFO buys shares. They know the numbers and are typically pretty risk averse. To me, it is the insider purchase that carries the most weigh. And this is a really big check. This bodes well ...
|Entry||03/08/2013 04:22 PM|
Better than purchase by pres,ceo,coo,director is the cfo buying. Conservative almost to a fault
these guys know the numbers. Can outside develpments blindside them,yes, but bet with them.
Here we have a cfo who owned 25k at weeks' beginning,tripling his size by buying 50k to own 75k
at 13.19. It doesn't get better.
|Entry||03/11/2013 12:28 PM|
That was my first lengthy exposure to CEO and CFO and they are both terrific. I didn't expect anything negative, but at small companies like this you sometimes get a shudder....They could be running and much larger company which is perhaps the plan.
|Entry||03/12/2013 01:23 PM|
I had to hop off the call early due to spotty weather in our spring break location...Was there any mention of Galaxy S4 by management or JPM or the que? Two days away from another potential catalyst.
|Entry||03/13/2013 09:40 AM|
Google bought a voice and image research firm out of Toronto, DNNresearch. Certainly looks like they're going down the path to more voice recognition technology.
|Subject||RE: RE: Google|
|Entry||03/13/2013 09:57 AM|
Great find. I don't think there's any doubt to those paying attention where Google thinks the future is going. Surely these guys think the concept of typing is ridiculous, and that everyone will have that view before too long.
Thanks for posting.
|Subject||RE: RE: RE: RE: Adding|
|Entry||04/18/2013 01:41 PM|
cuyler + bafana,
In the long run, is the CRUS news bad for ADNC? Does it indicate a general slowdown in smartphone/tablet sales or simply mkt share pickup by Android over Apple. Sure, there is a short-term hit due to being embedded in 4, but ADNC's long term prospects tare hitched to Android and non-Apple products.
|Subject||RE: RE: 2013 revenue|
|Entry||04/19/2013 10:07 AM|
Ochre, to expand a little on the PC/Ultrabooks/adjacent market sales that Cuyler mentioned, if you look at the 13-Sep-12 conference call transcript, this section is relevant:
As you think about these adjacent opportunities, I think you guys said on a call it'd be about $20 million next year. How do you see that shaping up in terms of the first half of the year versus the second half?
Kevin Palatnik - Audience, Inc. - CFO:
We've seen a lot of inbound traffic on that, if you will. And so, we talked about $15 million to $20 million worth of incremental revenues. Incremental in the sense that the prior models had contemplated this further out in time. And with that acceleration, we now see it in 2013. Within 2013, we would say that it's more loaded to the second half than the first half. ... We're not at the stage that we have purchase orders. So it's in very stages prior to purchase orders, depending upon which customer, which market..."
Also I believe this sentence from the 10-K is of relevance when interpreting the CFO stock purchases:
10-K Page 47, Item 7:
"We typically commence commercial shipments of our products nine months to one year following a design win."
with the following caveat from a few sentences later:
"achieving a design win from an OEM does not ensure that the OEM will begin producing the related product in a timely manner, if at all, or that the design win will ultimately generate additional revenue for us"
|Entry||04/19/2013 10:56 AM|
I'm trying to get a handle on the differences between ADNC and the audio products from CRUS. Here's my non-engineer understanding of the relationship... please correct/add if I'm wrong.
CRUS makes the CODEC that is used in all the most recent iPhones (4, 4s, 5). A CODEC codes and decodes the audio signal and has long been a part of phone designs. ADNC also has a CODEC product. In addition, ADNC makes a leading edge audio processor chip that sits next to the CODEC and makes the sound quality much clearer. This kind of audio processor is a relatively new addition to phone design. ADNC sold the processor, but not the CODEC, that went into iPhone 4 and 4s. Apple went in-house with its processor design for the 5, but kept buying the CODEC from CRUS.
Am I in the ballpark?
On another point, VZ had a good read through on 4 and 4s sales in Q1.
|Entry||04/19/2013 11:19 AM|
the CRUS product is sitting a different level in the "stack" and is a much more commodity product. this technology has largely existed for decades. It has been improved and refined, of course. CRUS's main moat is the fact that it is built-in and engineers know it well. The switching costs to replace are large because tremendous QA is needed, etc.
ADNC technology is much more state of the art (and value-added) in taking the output from the dsp and "smartly" transforming it (if user is speaking). Or vice versa, handing off to dsp (if user is listening).
|Entry||04/19/2013 11:21 AM|
Box - I'm not an engineer either, but I think you're pretty spot on with respect to ADNC's voice processors including the new eS325 which is likely going in most CY13 phones. The eS325 includes simulaneous 3 mic processing, optimized automatic speech rec, mobile audio zoom, de-reverb, super wideband support for VoIP and enhanced stereo recording. That said, ADNC's latest eS515 integrated voice processor has a complete audio codec subsystem and we understand it's likely to ship later in 2013. Click the links to learn more.
The key as I understand it is sound quality, which is spec'd in by carriers as consumers tend to blame the carrier if sound quality is not the best. Therefore, ADNC markets to OEMs but the carrier spec demands play a significant role in the OEM purchase decision.
Separately, I'm hearing that Intel is requiring PC/Ultrabook OEMs include speech rec / advanced audio in new products in order to get access to Intel's "slush fund" of marketing dollars. I can't prove this, but it seems to make sense.
|Entry||04/22/2013 10:37 AM|
solid idea. wanted to see the rationale or source behind the $1.10 per unit price assumption. and if it scales down (drastically for older versions?). Obviously the revenue beat assumption rests on this ASP and a slightly lower number per unit would change sales estimates a lot.
|Subject||RE: RE: ASP|
|Entry||04/24/2013 12:55 PM|
Looking a little more at the ASP... I thought I'd start w/ ADNC sales to Samsung since we know what their sales were to Samsung in 2012, $69M. We know ADNC is in all the Galaxy series phones (Galaxy 2,3, and 4, plus the Note 1, 2... I backed out Galaxy I sales since I don't think ADNC was in that one). Samsung sold 84M units of those phones in 2012. There are also other Samsung smartphones w/ ADNC processors. Non-Galaxy smartphone sales were 121M units in 2012. If we conservatively assume that ADNC was only in 20% of those other smartphones... ADNC was installed in 108M units sold by Samsung in 2012. ADNC revenue on those units was $69M... or $0.64 ASP.
My guess is that by Q4'12 ADNC had better penetration into the lower tier of Samsung smarthphones. So I did the same calculation for Q4'12 only... but assumed 30% penetration into the lower end smartphones. That assumption gives us Q4 ADNC units sold to Samsung of 39M. ADNC sales to Samsung in Q4 were $21.7M... or $0.56 ASP.
Looking forward to 2013, I used Morgan Stanley estimates for Galaxy family sales and total smartphone sales. Galaxy is expected to sell 152M units... other smartphones 156M units. If we assume ADNC is in all of the Galaxy family and 50% of the other smartphones... they'll ship 230M units to Samsung. ASP will likely go down from 2012 since there is better penetration into the older/lower-end phones. At $0.45 ASP... ADNC sales to Samsung will be $103M.
My takeaway from all this is that the ASP's are way lower than we expected. No doubt Samsung gets better pricing than the smaller customers... but it would take far higher pricing for Huawei, Xiaomi, and the others to offset such a low ASP to Samsung. Plus, I don't see Huawei paying top dollar to any component supplier.
Am I over-looking something here?
|Subject||RE: RE: RE: ASP|
|Entry||04/24/2013 01:36 PM|
Not sure about your math and sources. Note the following:
From 11/28/12 CSFB Presentation Transcript:
John W. Pitzer
Pete, can you help quantify a little bit, if you think about the incremental content that the eS515 allows you to address, is it an incremental dollar per phone, is it $2.50 per phone? What kind of range should we think about?
Peter B. Santos
Our digital voice processors, they tend to cluster around $1 from an ASP standpoint. And the joint solution, it will have an ASP, as it's not quite double that range, but will also have variability around it.
[earlier] And beyond the PC market, in these adjacent markets, we see more than a 700 million units additional TAM. And in some of these markets, such as automotive, we see the opportunity for much, much higher ASPs and gross margins.
From 1/31/13 Earnings Transcript:
Peter B. Santos
That said, the ASPs that we'll see, as we've stated before, from the Smart Sound Processor, the 515, are going to be substantially larger. So from a revenue standpoint, it could approach something like 1/3 or more of the revenue from this generation.
Hope that helps.
|Subject||RE: If you like ADNC, also look at PSMI|
|Entry||04/24/2013 04:00 PM|
you think PSMI has truly protectable proprietary technlogy at the same level as ADNC?
|Subject||RE: RE: If you like ADNC, also look at PSMI|
|Entry||04/30/2013 02:21 PM|
YCOMBINATOR, any thoughts on the selloff? quarter/outlook seemed ok, albeit the 2h ramp. what do you think folks are focused on? im surprised its off so much, i am still constructive on it here just wanted to make sure im not missing anything.
|Subject||RE: RE: RE: If you like ADNC, also look at PSMI|
|Entry||05/01/2013 11:44 AM|
I don't know what the market was expecting out of the Q2 guide given where AAPL is in its annual iPhone cycle, but I thought the quarter and guidance was decent.
As 50c mentioned, the inventory build is a negative, but somewhat mitigated by the mix shift toward raw and WIP. There may still be a risk of an inventory write-down because the AAPL part is customer specific, though a 5S model might use the same parts.
Gross margin guidance for Q2 was down because of production levels and lower yields as their new Step8 process ramps. Once yields ramp though, Step8 will be a tailwind to margins since you get the benefit of Moore's Law with smaller feature sizes.
Otherwise, not sure why the sell-off, though the stock did get a VIC pump after cuyler posted. We all know AAPL is launching a new iPhone later this year. There were 118mm iPhone 4Ss sold versus 86.4mm iPhone 4s. Given the replacement cycle, the 5S cycle should be stronger than the 5. If one quarter is too long for investors to wait, all the better for us long-term guys. We get to buy more stock at lower prices.
As for the long-term, I think PSMI is in a good position. An interesting exchange at the end of the call. QCOM's vision for the future is a fully integrated RF front-end, which has many obvious advantages. QCOM's competitors will have to offer a competing solution. If PSMI wins in its suit against RFMD (and Murata certainly thinks there is something to PSMI's IP), then all roads to a fully integrated CMOS RF front-end run through PSMI.
<Q - Harlan L. Sur>: Hey, guys. Thanks for taking my follow-ups. So with the announcement by Qualcomm on their SOI-based front-end strategy back in February, I'm just wondering if this is but other of the base band and reference platform guys closer providing to form more of a stronger partnerships with Peregrine given your IP position in SOI, and the fact that you guys are pretty much the only pure-play in SOI and can offer the full capability for an RF front-end solution as well?
<A - James S. Cable>: Yeah. I think that that's an interesting question, Harlan. And we've been pretty consistent about our answer there. So how do we see the announcement of Qualcomm's RF360? I think, A, we view it that it does, in fact, validate our vision that we formulated 10 years ago that you could in fact do whole front-end integration and you could do it in CMOS. I think we've – we would say we've proved all the building blocks. And certainly for Qualcomm to come in and announce it, they were doing the same thing, provides credibility to that vision.
I think it's fair to say that the end customers, the handset OEMs are obviously going to want more than one supplier. The other chipset manufacturers don't want to be a in a position where they're at a competitive disadvantage with respect to front-end technologies. So in fact, yes, we've had lots of conversations on this topic since they – Qualcomm made that announcement. I think we have the strongest set of products in CMOS. We have the longest history of doing it. We have the largest amount of what we would argue is fundamental IP. So we – I think of the Qualcomm RF360 announcement as net plus for us. And not to say that they are not going to be brutal competitors at some point in time, I
|Subject||Silly yet Cuyler?|
|Entry||05/03/2013 11:20 AM|
OK...so forward guidance wasn't as hoped for in the most optimistic scenario...But this hammering seems more appropriate for a disaster which this clearly was not. Are you "done" with the name, or would you not be tempted in this drubbing to step in? Thanks for the great idea, even if today is nasty. Still a ton of room between your right up price and today.
|Subject||RE: RE: Silly yet Cuyler?|
|Entry||05/03/2013 12:23 PM|
Thanks for the response Cuyler. I think I'm going to stick a "silly" bid in below 13...The way this thing is trading I just might get hit. Some comfort in being able to buy this cheaper than Palatnik.
|Subject||RE: If you like ADNC, also look at PSMI|
|Entry||06/06/2013 09:47 AM|
Carl Burrow, who joined in Feb as VP of Worldwide Sales & Applications, plunked down $103,300 yesterday to buy 10,000 PSMI shares on the open market.
|Subject||Cuyler, why not reenter here?|
|Entry||06/06/2013 02:24 PM|
Since the stock is back to where it was preannouncement, I am curious as to why you have not reestablished a long position?
|Entry||07/26/2013 02:24 PM|
I don't have access to their research. Did they give any rationale for the change?
|Subject||RE: RE: RE: wow...|
|Entry||08/01/2013 05:35 PM|
Wow... based on everything I'd seen from you on VIC before right now, I was really impressed with you. But what you just wrote strikes me as rather surprising:
"... and am out with minor damage - fortunately it was a tiny position for me due to the customer risk."
I just checked, and nowhere in your comments 119, 123, 124, or 125 did you give any hint of this being a "tiny position due to customer risk". It sure sounded like you were very bullish and strongly recommending it. In the future, why not add that tiny bit of info after you pound the table and tell people to buy something? Maybe you could add a P.S. at the end... something like, "Oh, by the way, I may sound unabashedly bullish in the above, but this is just a tiny position for us because it's really risky...".
|Subject||RE: RE: RE: wow...|
|Entry||08/01/2013 05:39 PM|
cuyler, really??? one down guidance and your assessment turns from super bullish to a stock with customer risk and worth cash + IP...and thanks for the after-hours dump...you hype it up nicely after you buy and then turn drastically once you're out...your opinion does a 180 on one quarter's numbers...I wanted to mention this the last time around when you did this but let it pass...
Yes, I know we are big boys and responsible for our own convictions/positions and should rely less on others...that's fine but please don't overhype and then over-dog it as and when it suits your portfolio...
|Entry||08/01/2013 07:56 PM|
I have found cuyler to be as real time and open aoubt his proess as it gets. He thought it was cheap in the 12's, and told you after he established his or his firm's position. Holy cow, he is supposed to let you front-run his partners? So he got this one wrong...So what? 90% of the membership, including myself, are simply dismal at follow-up unless they get poked / harassed enough...cuyler does it without the cattle prod. Further, there are a lot of "open" catastrophe's (short esp.) on VIC without any updates, or closure...The authors simply go dark. I do not know cuyler, but his posts seem right in context with the way I've read him all along...And BTW, I am getting hammered in ADNC as I do in fact own it for the third time.
|Subject||RE: Box, aagold|
|Entry||08/01/2013 08:39 PM|
It's true that a lot of people just go dark, and I do appreciate that Cuyler follows up. Also, I do see that in comment #118 he clearly says it's speculative, so perhaps I was a bit too harsh. Just for the record, I don't own any ADNC so I didn't get hurt by this; I just found his comment strange given the positive impression I had and the lack of any "beware, this is speculative and a tiny position for me" warnings in the comments after #118.
|Subject||Gurus, Nimbleness, Focus|
|Entry||08/01/2013 10:10 PM|
Hi, guys --
A hard lesson I've learned from VIC is that, if you're going to get guru'ed into a stock, you should
damned well get guru'ed out. And Cuyler did that here.
Cuyler (and please don't take this the wrong way) is obviously not a deep value investor. I'm looking for things that can double or quadruple over 2-7 years. I want to find things where the quarterly earnings reports are just, well, noise. I tend (for better or worse!) to look at 20% moves one way or the other as being meaningless. I wish I had confidence in my ability to forecast 20% moves in a quarter, something that Cuyler's obviously pretty good at.
IRDM and ADNC have both declined ~20% on earnings. It's instructive to compare Katana & Cuyler's responses. Nothing wrong with either approach.
|Subject||Request for Cuyler|
|Entry||08/02/2013 07:08 AM|
If you wouldn't mind, please don't post ideas in the future that may turn out not to be profitable.
|Subject||RE: Request for Cuyler|
|Entry||08/02/2013 08:20 AM|
zzz - LOL, you got it!
|Subject||RE: RE: RE: Request for Cuyler|
|Entry||08/02/2013 10:52 AM|
I had some of the same questions (I read transcript/did not listen--i know cuyler said sounded like a funeral). Why isn't Q3 (or even H2) simply the confluence of several temporary factors that will be gone in 12 months?
My thesis here has always been that ADNC had a decent chance of being the winner-take-all in the Android mkt for its technology space. When we bot at $9, we were getting the possibility of this huge upside for free. As it racked up design wins (and partnership with China Mobile), it looked like the probaility was increasing . . .
The earnings/call is clearly a setback, but how much does it affect the probability that they dominate the Andriod handset space in 2014 and beyond?
In this vein, the absence of the technology in Moto-X (and currenctly shipping lower/medium-end mkt) strikes me as a bigger blow to thesis than the Q3 forecast.
So, when we step back and consider 2014 and beyond, how does ADNC's competitive position look versus 6 months ago (when at same price)?
Aside: I have always been suspicious of China Mobile press release. It did not hurt, but it certainly did not lock up the Chinese mkt either.
As for a sale, I do think this delays a sale . . . from the perspective of a buyer. I think any potential buyer is going to be unwilling to pay a huge premium until ADNC can solidify its position in the market. So even if now willing to sell, no premium buyers around.
|Subject||RE: Moto X|
|Entry||08/05/2013 02:29 PM|
I agree that the Moto X could be much ado about nothing. Motorola (pre Goog) was always an "in house" shop. Did they change instantly when acquired? Not sure. I would have thought that Android guys would want something like noise cancel technology to be standard, but I agree that the politics and apprearences might be messy. And I am sure in the first phone iteration, whether or not to use ADNC technology was not a first-order consideration.
And I agree with your sentiment that dismal q3 forecast should not be a big deal and does not say much about the big-picture thesis. After all, we knew adnc was vulnerable to a quick shift in the handset marketplace.
But I fear confirmation bias at this point. I halved position and did not think about all weekend and came back today thinking the original thesis is still intact.
|Subject||RE: RE: RE: Moto X|
|Entry||08/05/2013 05:11 PM|
good points. Several thots:
- I think the personal criticism you took over adnc was unfair. I think you add tremendous value on VIC, and go far beyond the requirements in terms of transparency. I think frustration just got the better of some.
- I think a lot of the comments are also simply a style difference that turns into style criticism. But I think this was particularly unfair in this case because it was clear you were trading it based on quarter-to-quarter results. I think this religious definition of "value investing" is silly, and just because I do not have skill to trade ADNC qtr-to-qtr does not mean you are not producing alpha in doing it.
And this is a good segue . . .
My sense is that you had a long-term thesis (i think you thought this had triple potential) and a traditional technology quarter-to-quarter overlay. To be clear, the model on which the stock has traded has been the quarter-to-quarter thesis, not the medium-to-long term thesis I was using.
I never put much emphasis on the quarter-to-quarter stuff that many of the comments discussed. For example, the sales of the iPhone 4 and 4s were significant in recent quarters but was largely meaningless to me as they had been designed out and so deserved minimal multiple and more importantly, had no strategic value. If you tell me that apple ends up selling 25% more future iPhone 4's than expected, what does that add to stock value?
My thesis (which might be slightly different from yours but seems aligned with Box and werd) was that this was a technology company with:
- legit technology -- it solved a real problem and performed better than competing technologies
- that was successfully implemented in real products by real manufacturers
- and with a small fraction of shipped products was trading at 8x after-cash; note that the importance of the 8x is that it "proves" that if there is a dominant provider of the technology with a moat, that provider will be valued at many multiples that of ADNC (hello $30).
- was racking up design wins on real products and increasing share in each segment of Android mkt
- racking up design wins with all major manufacturers and not just Samsung
- and had chance to build moat and become dominant provider; switiching costs significant here; not overwhelming as we saw with Apple, but significant.
- decent, responsible mgmt
- IP, cash, existing relationships, and responsible mgmt mean that there is reasonable floor here ($7) so risk-reward is good.
The 8x was relevant in that if they won or even was part of duopoly, I knew it would trade for more than 8x and i knew that earnings would be multiples higher than at present . . . i.e. $30 is possible. But the 8x is irrelevant in a traditional value investor sense because we knew it was going to be lumpy and subject to the twists and turns of the dynamic handset market. And that the moat might be breached in one generation of phones and so 8x goes to 1x fast.
If they can dominate the market and keep increasing their share of ALL phone segments with design wins, the profits will come. I agree that Samsung's setbacks do not help on a strategic basis and so I think thesis is also in question. And I think we agree that even providing an opening for Motorola's in-house technology increases chances that others say "this is commodity technology that no one can really tell the difference so I am not going to pay premium for adnc."
So, I am trying to sort through it all and figure out how all the information over past 9 months has affected my view of this company in, say 2015. After the first 100 hours of thinking about it, I am more optimistic than you.
|Subject||RE: RE: RE: RE: Moto X|
|Entry||08/06/2013 03:00 PM|
Spoke w/ management yesterday and wanted to share a few thoughts...
|Entry||08/23/2013 10:18 AM|
Has anyone done a public background check on him? Are we sure that he is not independently wealthy via family, wife, Google stock options . . .?
If not, this is one of the stronger endorsements I have seen. But I am beginning to wonder if this guy has some wealth from outside Audience and Cadence (former employer).
|Subject||More Insider Buying|
|Entry||09/17/2013 09:43 AM|
CFO bought another 10K shares last week. Done in multiple transactions around $11.05. That brings his total up to 124K.
|Subject||RE: New Enterprise Associates out at $9.50|
|Entry||11/25/2013 03:22 PM|
I would love to hear a post-mortem from you on this thesis with respect to the core of the idea: the technology.
We have exited the position--at a wash to relevant index--not because of disastrous earnings 4 months back but because the technology is not dominating. It is solid technology but clearly not must-have technology. The exciting part of the idea to me was that the technology was going to be viewed as must-have or differentiating technology for all but the lowest end phones. This would make it a home run both as a standalone company or as a strategic acquisition.
It continues to have design wins but the deluge of design wins that we had hoped to see has not happened and its technology is not viewed as differentiating. As such, it is not likely to be a competed-for acquisition, and it is priced at fair value around $9-10. A decent-premium acquisition is still possible, but the lofty $15+ (or even $30+) valuations that we dreamed of are off the table.
I will still argue that based on the information known at the time, this was a great idea at $8. Downside was minimal and there was the possibility of a home run.