A bite of the Apple for SanDisk and Nova

Friday saw the end of the best week we have had so far this year, with rises of around 4% in all the indices. The previous week, the indices fell by more than 3%. What is interesting is that this manic-depression is rife not just in the markets themselves, but also in the forecasts of the various experts. The headlines veer almost daily from predictions of imminent total collapse to predictions of a rally of unprecedented strength.

In the end, next month's financials and guidance season will set the direction, as will the severity of the profit warnings we will be treated to beforehand, some of which we will probably start seeing this week.

In the technology sector, this will be mainly Apple's (AAPL) week. This evening, at the opening of its annual developers' week in San Francisco, the company will announce a revamp of its computer lines, something it has not done for a long time.

Besides computers, the speculation ranges from the unveiling of a new iPhone via the launch of a mini-iPad to the unveiling of a first television, which the late Steve Jobs hinted at, a hint lately repeated by current CEO Tim Cook. However, the chances that these devices will be launched today are low. Whoever believes that we are in for big surprises today will point to Cook's recent remark that "we're going to double down on secrecy on products."

Much talk about NAND

Two stocks that I hold here, which rose last week by three times the rise in the indices, are connected to the Apple product food chain. The first, SanDisk (SNDK) is 13% up on its annual low. Investors are starting to believe the hints dropped by the company's management that if in the first half year they collapsed because of the collapse of the customers routed by Apple, in the second half SanDisk will grow again, because it will sell to the "market leaders". You don't have to be Sherlock Holmes to understand that this means Apple and Samsung.

It looks as though we will still not find out this evening what exactly SanDisk will sell to Apple later on in the year, but what is certain is that there will be a great deal of talk about storage on NAND chips, that is, SSD. This is a market that SanDisk is counting on very heavily. SSDs will be part of the new thin computers that Apple will launch today to compete with the ultrabooks, some of which were launched last week at Computex in Taiwan.

Another stock that rose 13% was Nova Measuring Instruments Ltd. (Nasdaq:NVMI; TASE:NVMI). They must be working round the clock in Rehovot in order to supply quantities of measuring systems to the biggest chip subcontractor in the world, TSMC (TSM) of Taiwan. These are systems for 28 nano production lines on which the most advanced processors by Qualcomm (QCOM), Nvidia (NVDA), and others, are produced. There is a considerable shortage of these processors, because TSMC and other companies did not anticipate the strength of the demand, which means that they are now speeding up investment.

Qualcomm is the supplier of the processors for Apple's iPads and iPhones, and if Apple designed the next generation of iPhones on the basis of Qualcomm processors produced on 28 nano lines, it has a problem, because the shortage is expected to continue until the end of the year at least. Among the advantages of these processors is that consume much less energy than processors fabricated on 40 nano lines, and their performance is better.

Further collaboration between Juniper and Radware?

I believe that, although Nova is a very small equipment supplier, it is one of the suppliers that is being pressed to supply systems for TSMC's 28 nano lines. This is because these are very advanced lines that require more measuring systems of the kind supplied by Nova than the lines employing production geometry of 40 nano. Investment bank JP Morgan estimates that TSMC is adding another two 28 nano production lines, to reach five production lines at it three fabs.

To end with, Juniper Networks (JNPR) is holding its annual analysts' day tomorrow, and that is presumably where it will amplify on its collaboration with Radware (RDWR). The two companies announced an OEM agreement in routers for communication providers last year, an agreement that will boost Radware's profitability this year, because it concerns software.

Last month, analyst Ittai Kidron of Oppenheimer wrote about another OEM agreement, also concerning software but much bigger, for switches for computing centers. We have yet to hear about such an agreement from the companies themselves, but if it's true, we will very likely hear about it tomorrow.

Published by Globes [online], Israel business news - www.globes-online.com - on June 11, 2012

? Copyright of Globes Publisher Itonut (1983) Ltd. 2012

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