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| http://www.gilder.com/ | Issue 280.0/January 19,
2007
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HEADLINES:
- The Week / A Technocopian Week
- Friday Feature / Needham: The Good, the Bad, the Confusing
- Friday Blogger Bonus / Sensing Synaptics?
- Readings /
SPECIAL OFFER
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Filter Out the Wall
Street Noise |
The
Week /
A Technocopian Week
George
Gilder (1/13/07): I had a technocopian week in New
York at the 10th Needham Growth Conference, where attendees seemed unabashed by
the conventional wisdom in the academy that growth is not serially
correlated--that past growth is no more predictive of future growth than
shrinkage is. Enshrined in several fascinating books I have been reading on
investment strategy, from Ken Fisher, to Burton Malkiel, to Michael Mauboussin,
to Aswath Damodaran, this consensus reflects a model that aggregates and
averages away everything important. It provides a huge opportunity for us
residual stock pickers.
We
don't do averages here. Creative entrepreneurship appears random because each case is
different. But it is mere numerology to think an apparently random pattern
implies random causation or intrinsic unpredictability. Information theory says
that--in principle--a rendition of random white noise is indistinguishable from
an index of creative surprises that reflect intense processes of planning and
innovation. However, I can predict confidently that an array of funds that
assumes randomness in stock picking will generate random returns over
time--some high, some low, but rarely exceeding the relevant indexes.
Needham
is a conference of technology entrepreneurs concocting creative surprises. Gilder Technology Report tech analyst
Charlie Burger and I saw some 40 companies.
Let's
begin with an anti-climax noggin. Through the first day, Charlie's favorite
remained Corning (GLW).
At six times revenues, Corning seems well valued, but it is central to the
paradigm on all sides--optical fiber, optical displays, green lasers, general
incandescence. But maybe it will come back down again before it goes up. I said
that before about Apple (AAPL).
My
own anticlimactic favorite was Semitool (SMTL).
Although the company's stock has lagged its rival Novellus (NVLS) over the
last 12 months, everything we predicted early last year is coming to pass.
Semitool's wet processing and electroplating tools gain share as the industry
moves to lower line widths and copper metalization. Moreover the company's
complete vertical integration of the entire manufacturing process from metal
forming to wet chemistry gives it greater agility in multi-disciplinary
innovation than any other company in the semi-gear market.
CEO Larry Murphy and founder Ray Thompson disputed earnestly over how long it would take the company, now at $243M revenues, to reach a billion, but the excitement of the executives was as contagious in New York as it was for me last year in Kalispell, MT. Three years ago, after an intense three weeks of designing and skunkworking, Semitool contrived the first version of its Raider series, a tool that now clusters as many as 16 cells for performing as many as 57 steps, so far, in the semiconductor wafer fab (out of some 500-700 total). SMTL's central expertise is in electroplating, cleaning and planarizing the copper metalization layers that are replacing aluminum on the surface of microchips.
The
news of recent years is an increasing conversion of leading edge logic devices
to copper, led by Advanced Micro Devices (AMD), using
Semitool equipment. Intel (INTC) still
uses Novellus (NVLS). The news this year is copper's breakthrough into the huge
memory market, led by a bold move to copper interconnect by Micron (MU), the
number-two memory producer behind Samsung. SMTL has parlayed its MU
breakthrough into an 80% share in copper tools for memory and the entire
industry is likely to join the Boise pioneer on the cupric frontier. (See Spirit
of Enterprise for the historic details of this longtime favorite
company.) In each fab, copper's chemical incompatibility with aluminum makes it
an all or nothing choice. By moving first, Micron benefits by faster, cheaper,
lower power memories. MU has also taken a global lead in image detectors for
digital cameras and gives us a double-noggin with SMTL.
Ikanos (IKAN) remains
a can of worms looking for a "major industry figure" to run it.
Reeling from the loss of its CEO, Rajesh Vashist, who led it to industry
leadership in three years by tapping Indian design talent to fulfill his vision
of true broadband DSL, it retains a large share of the market for VDSL2, which
remains the technology of choice for converting copper lines into 100 Mbps
broadband conduits to homes and small offices. Early last year it complemented
its VDSL expertise with Analog Devices (ADI)'s Fusiv
line of 100 Mbps network processors for access gateways linking appliances in
homes. But Conexant (CNXT) reports
a design win against IKAN at AT&T (T).
Read
George Gilder’s complete accounting of Needham news. Logon with your GTR
subscriber ID at www.Gildertech.com now.
|
The Gildertech Blog, http://blog.gildertech.com/ | Logon now to see what’s new. for FREE
audio downloads of select speakers and panel sessions. |
Friday Feature /
Needham: The Good, the Bad, the Confusing
Excerpted
from GTR subscriber “Hepcat’s” comments on last week’s Needham Growth
Conference, posted on the GTR subscriber-only message board (1/14/07):
Ikanos (IKAN): It certainly sounds like the company has solved their
Gen 4 yield issue. According to management the problem was a
manufacturing issue (not design, not contamination) caused by
too-high temperatures during a certain process step. There was
some back and forth between IKAN and Conexant (CNXT), with CNXT
claiming IKAN was not compliant with VDSL standards etc. IKAN
claimed otherwise etc. But that brings up the issue
of "standards." IKAN talked about the power of incumbency
and the needs to be interoperable to get a second spot at AT&T. To me
"standards" assumes interoperability. The company indicated
that their window at AT&T is closing. If CNXT is able to support a
48-port line card, then AT&T is not likely to support or risk a second
vendor in the network. Also CNXT claims that they have been qualified in Alcatel
(ALA), which was IKAN turf before. IKAN said that Broadcom (BRCM) is
in trials as well. Some good news; some bad; some confusing.
Semitool
(SMTL): George
(above) expounded on this presentation already but I think this is the sleeper
stock of 2007-2008. Process node shrinks are driving the semi industry
into the well-patented arms of both SMTL and FormFactor (FORM).
MRV
Communications (MRVC): Growth with limited pricing power and therefore slim margins. I
have sworn off these thin margin stories. The company at maturity only
expects 25% gross margins in its Luminent business. Given the quarterly
volatility inherent in telecom cap ex spending this implies that even slightly
soft quarters will swing the EPS numbers pretty dramatically. And with
MRVC planning a spin off of Luminent at some point that 25% gross margin needs
to then support the R&D and entire corporated SG&A. Emcore
(EMKR) (also at the conference) and MRVC sniped at each
other like Donald and Rosie, and I had the same
reaction: entertaining but neither participant is very attractive.
George Gilder (1/15/07): Thanks, Hep, for the acute, pithy account.
Touché on the analogy of the triplexer clowns with Trump and Rosie.
Read more of Hepcat’s thought on Finisar (FNSR), Emcore
(EMKR), Atheros (ATHR), Marvell
(MRVL), QuickLogic (QUIK), and Novellus (NVLS) by logging on now with your GTR subscriber ID at www.Gildertech.com.
|
The Friday Letter Book of the Month By Ken Fisher, with Jennifer Chou, Lara Hoffmans and
James Cramer (Forward)
|
Friday Blogger Bonus / Sensing Synaptics?
MacRumors (1/15/07): MacRumors
reported on the Synaptics [SYNA] ClearPad technology
in August, when Synaptics announced a concept phone (Onyx) based on their new
"ClearPad" technology. The ClearPad is a capacitive touch screen
(much like laptop trackpads) that offers these advantages:
ClearPad is based on Synaptics' proprietary sensing technology, and will
offer unique capabilities such as two finger input, proximity sensing, text
entry and high resolution finger input that can dramatically improve and
enhance the user experience with a touch screen.
Readers will note that many of these features are identical to Apple's
[AAPL] iPhone
screen technology. Synaptics recently demoed the Onyx phone demo (video) at CES and described some of the
relevant features.
One unique aspect to it is the completely flat face of the device - like
the iPhone. Most existing touch sensitive screens use resistive technology,
which requires an elevated bezel surrounding the touch screen. While this new
technology gives the iPhone a sleek look, one disadvantage (or advantage?) to
the capacitive touch screen is (much like your laptop trackpad) that it is only
sensitive to skin touch. This behavior was mentioned by David Pogue in his list
of iPhone FAQs. ("[The screen responds] ONLY to skin touch.")
So does the iPhone use Synaptics' ClearPad technology? Gearlog
indicates that Synaptics has not officially commented one way or the other, and
Apple certainly isn't saying.
It's certainly possible that Apple has developed similar technology on its
own. Last year we reported on Apple's touch-screen research as well as Apple's
acquisition of a company known as FingerWorks, who had done significant
development in multi-touch input devices (iGesture Pad). According to
individuals close to the company, Apple had acquired the technology and
Fingerworks founders Wayne Westerman and John Elias have since been working for
Apple.
Despite closing for business in 2005, it appears that Fingerworks
(Westerman and Elias) filed a number of patent applications in July of 2006 describing
multi-touch input methods:
Apparatus and methods are
disclosed for simultaneously tracking multiple finger and palm contacts as
hands approach, touch, and slide across a proximity-sensing, multi-touch
surface. Identification and classification of intuitive hand configurations and
motions enables unprecedented integration of typing, resting, pointing,
scrolling, 3D manipulation, and handwriting into a versatile, ergonomic
computer input device.
Regardless of whether or not Synaptics is the supplier for the iPhone
itself, analysts see high demand for Synaptics from industry competitors who
will try to mimic the iPhone interface. According to MobilityToday,
Synaptics' ClearPad technology will become available to OEMs "by the end
of the year."
Check
out the MacRumors blog:
http://www.macrumors.com/pages/2007/01/20070115211432.shtml
____________________________________
Readings /
Joules, BTUs, Quads—Let's Call the Whole Thing Off
http://www.spectrum.ieee.org/jan07/4820
Winner:
Nothing but Net
Britain
switches its entire phone network to the Internet Protocol
http://www.spectrum.ieee.org/jan07/4831
Wrong Way for Wireless
http://www.forbes.com/technology/infrastructure/2007/01/11/bain-wireless-entertainment-tech-intel-cx_df_0112phone.html
The Hottest Technology of 2007
http://www.forbes.com/technology/personaltech/2007/01/17/video-sony-cellphones-tech-cx_gd_0117ces-outlook.html
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