MICROS Systems, Inc. (MCRS), is the world’s leading developer of enterprise applications serving the hospitaliy and specialty retail industries. MICROS serves table service and quick service restaurants, hotels, the leisure and entertainment industry, and speciality retail stores with complete information management solutions including software, hardware, enterprise systems integration, consulting and support. The company distributes its products through subsidiaries, independent dealers/distributors, and company-owned sales and service offices around the world. This global network consists of over 4,600 employees, more than 80 wholly or majority-owned subsidiaries and branch offices in major markets and 115 distributors in 45 countries.
Netflix: The Short Version
“provides online movie rental subscription service in the United States to approximately 10 million subscribers. The Company offers a variety of plans and provides subscribers access to over 100,000 digital versatile disc (DVD) and Blu-ray titles plus more than 12,000 streaming content choices. Subscribers select titles at the Company’s Website aided by its recommendation service and merchandising tools. Subscribers receive DVD’s by United States mail and return them to the Company at their convenience using its prepaid mailers. After a DVD has been returned, The Company mails the next available DVD in a subscriber’s queue. It also offers certain titles through its instant-watching feature. Subscribers can watch streaming content without commercial interruption on personal computers, Intel-based Macintosh computers (Macs) and televisions.”
“The Company promotes its service to consumers through various marketing programs, including online promotions, television and radio advertising, package inserts, direct mail and other promotions with third parties. These programs encourage consumers to subscribe to its service and may include a free trial period. At the end of the free trial period, subscribers are automatically enrolled as paying subscribers, unless they cancel their subscription. All paying subscribers are billed monthly in advance. The Company stocks approximately 100,000 DVD titles. It has established revenue sharing relationships with studios and distributors. It also purchases titles directly from studios, distributors and other suppliers. In addition, the Company has more than 12,000 content choices licensed for streaming. The Company ships and receives DVDs throughout the United States. The Company maintains a nationwide network of shipping centers that allows it to provide delivery and return service to its subscribers.”
“The Company competes with Blockbuster, Movie Gallery, Redbox, Time Warner, Comcast, DIRECTV, Echostar, AT&T, Verizon, Best Buy, Wal-Mart, Amazon.com, Google, Apple and Hulu.com.”
Netflix is a fine company that has done a good job growing revenues and earnings. The company’s sales have grown 18.9% for the MRQ vs Qtr 1 year ago and 13.2% TTM vs TTM 1 year ago. The five year growth rate for sales is a very strong 38.2%.
This is not time to own semiconductor stocks, either chip makers or equipment manufacturers. According to the Semiconductor Industry Association, worldwide sales of semiconductors were $14.2 billion in February, a decline of 30.4% compared to February 2008 sales of $20.3 billion. This is a continuation of the decline observed from the prior year. Sales were down by $1.1 billion from January 2009 levels of $15.3 billion.
‘The global semiconductor industry is going through one of the steepest corrections in its history,’ said SIA President George Scalise. ‘While it would be premature to conclude that the sales have hit bottom, there are some indications that the rate of decline has moderated from the final quarter of 2008.’
‘Demand for semiconductors is likely to continue well below 2008 levels for the next few quarters with a gradual recovery to follow as the global economy recovers,’ Scalise concluded.’
There are similar problems within the semiconductor materials market. The materials market was flat in 2008 as compared to 2007. Semiconductor materials market sales reached $42.7 billion globally in 2008. The industry group for the semiconductor materials market, SEMI, reports that “the wafer fabrication materials and packaging materials $24.1 billion and $18.8 billion, respectively.” These sales figures represent a decline from 2007.
“The global wafer processing equipment market segment decreased 31%; the assembly and packaging segment decreased 28%; the total test equipment sales decreased 32 percent. Other front end equipment sales declined by 32 percent”
We believe the market is discounting the recovery somewhat ahead of itself. It remains to be seen if the global economy will pick-up before 2010. Even if it does, the semiconductor market may lag the recovery. The companies we have on our watch list, Altera Corporation (ALTR), Analog Devices (ADI), Intel (INTC), QLogic Corporation (QLGC), Taiwan Semiconductor (TSM), Texas Instruments (TXN), and Xilinx (XLNX), are priced as though the recovery is already here. Sales and earnings will continue to decline through 2010. We would wait until there are signs of recovery before being buyers of semiconductor stocks.