tag:blogger.com,1999:blog-4815867514277794362.post8411979551880663051..comments2024-03-08T06:18:28.125+11:00Comments on Bronte Capital: Logitech and a divergence into days payable outstanding, Dell, Apple, and macroeconomic conditions in ChinaJohn Hemptonhttp://www.blogger.com/profile/03766274392122783128noreply@blogger.comBlogger10125tag:blogger.com,1999:blog-4815867514277794362.post-74401558422754406122011-09-17T02:26:42.599+10:002011-09-17T02:26:42.599+10:00Dear John can you please elaborate more your statm...Dear John can you please elaborate more your statment<br /><br />"Ultimately this is bad business practice. It stresses suppliers - it costs them money chasing you up. It builds distrust. Yet Apple does it - and the reason is obvious. Because it can. Apple has power and it is not afraid to (ab)use that power"<br /><br />I am working in the logistic freight forwarding company and our company start to analize the working capital including this DPO and they are asking me to increase DPO increasing DPO one solution is not to pay suppliers by 60 to 90 days can I really do this well i can do it I will not pay but how will I expalin to the my boss that i will not be responsible for any stop shipments especially that we are in the arab regionAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-56047914472978940542011-01-11T17:14:23.548+11:002011-01-11T17:14:23.548+11:00Hi John
Enjoy your blog
You have commented on a su...Hi John<br />Enjoy your blog<br />You have commented on a subsequent post that no one has commented on your China comments - I think its because no one understands what you are getting at there. I certinaly don't. Having completed the CFA, I am no financial dummy either. If you could elaborate a bit further that would be great, cheersAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-89103513415223419212011-01-11T14:10:30.884+11:002011-01-11T14:10:30.884+11:00Looking for stocks to short because Smartphones ar...Looking for stocks to short because Smartphones are putting them out of business? Go and have a quiet word to Gerry Harvey! <br /><br />The blow ups at Circuit City and Best Buy seem to have passed him by unnoticed. He seems to think it's a combination of local tax and ebay sellers killing him, yet the bloke still does not have a web site that allows on-line purchases. <br /><br />I presume the micro-in-store-franchise business model he's stuck with means national on-line sales would gut his franchisees sales and have them walk.<br /><br />With Smartphones representing a 10-15 in 1 product, dumb pipes like Harvey Norman simply have no value added with which to continue to exist (unless you call being a loan shark "value added")tsport100https://www.blogger.com/profile/16579456575826489096noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-15806395158194771552011-01-11T09:58:00.052+11:002011-01-11T09:58:00.052+11:00No opinion on Logitech or others in this sector, b...No opinion on Logitech or others in this sector, but I think you are quite right to tie this back into the Chinese macro. The short version, I think, is that Chinese banks (effectively underwritten by government) are happy to underwrite export receivables. This is largely funded by Chinese depositors getting low interest rates.<br /><br />You've chosen to focus on the effect on supplier relationships, but I think the key point is that the Chinese manufacturers are living on razor-thin margins. A change in finance terms will either kill (some of) them, or drive up prices - another way Chinese prices for export could go up without the dollar/yuan rate actually moving.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-57440081020997117262011-01-11T06:57:17.785+11:002011-01-11T06:57:17.785+11:00Enjoyed the post, and always enjoy your blog.
Out...Enjoyed the post, and always enjoy your blog.<br /><br />Out of curiosity, how exactly do you define days payable outstanding, for calculation purposes?<br /><br />Thanks!WSMhttps://www.blogger.com/profile/00131532131659441620noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-6652405152728563292011-01-11T00:47:40.981+11:002011-01-11T00:47:40.981+11:00I am a former shareholder of LOGI - I sold my stoc...I am a former shareholder of LOGI - I sold my stock late in 2008 after owning it for a number of years. Repeat: I dont own the stock. I'm not interested in owning the company today, but I'll play devil's advocate for the fun of it.<br /><br />I think you might be overestimating just how quickly their markets are declining, if they are even declining at all. I've heard multiple arguments over the years for being short: desktop sales are declining, keyboards/mice/speakers are commodity product, webcams are being integaretd, and now touch screens are replacing mice.<br /><br />1) How has LOGI managed to increase sales of standalone keyboards/mice by ~5%/year over the last 5 years while desktop sales have declined by about the same amount? Clearly, there is some growth opportunity here. Your "desktop is doomed" article is an ancient argument to short the stock.<br /><br />2) Dont you worry about the threat of new categories? Tablets are as much an opportunity as a threat. Did iPods destroy the PC speaker business? No, it actually opened up the ultra-high growth dock market.<br /><br />3) Are LOGI's markets really all that competitive? Go to a Best Buy and see for yourself. They mainly compete with MSFT, who for reasons I still cant figure out, make keyboards/mice/webcams. In most categories, LOGI only has one main competitor, and LOGI tends to dominate shelf space. LOGI is getting on average a very respectable 35% gross margins.<br /><br />4) What about LOGI as a natural acquirer for interesting CE companies looking to go to the next level? They bought Intrigue (now the Harmony remotes) for a mere $30m in 2004. I estimate it's earned $80-100m since. They bought Labtec for $35m in 1998. I estimate it's earned $300m since. They've done good deals in the past that tend to pay for themselves rather quickly.<br /><br />5) Google TV is and was a sideshow. The stock might have ran into the product release, but nobody realistically expected anything.<br /><br />6) The Remote apps, in a word, suck. I have an iPad and I've tried them. They're annoying. They're slow. What if my wife is using it? What if it's in another room? What do I tell the babysitter? These are simply not remote killers, never. <br /><br />7) The company generates a considerable amount of free cash flow. I dont agree with what they've done with it lately, but historically they've had about 10% free cash flow margins, and they bought back stock and did shrewd, small acquisitions. Plus, the balance sheet still shows no debt at all and almost $2/share in cash.<br /><br />In short (no pun intended), this is a pretty good company. I'd short it if the valuation got absolutely ridiculous, otherwise I'm content watching from the sidelines.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-15724018429328658842011-01-11T00:43:25.103+11:002011-01-11T00:43:25.103+11:00I have no position either way, but a couple of poi...I have no position either way, but a couple of points.<br />No one should ever look at trailing multiples.<br />On Mar-11 YE EPS expectations of $1.21, the stock is on 15x.<br />Ex the current cash, that's 13.6x or given reasonable cash generation over the next 12 months of another $1 per share means 12.8x.<br />22x it is not.<br /><br />The inventory build is intriguing.<br />I always look on a quarterly basis versus previous years to avoid the high seasonality issues.<br />So for Sep-10 Q, inventory was 86 days of the annual run-rate of COGS up A LOT from the 63 days of the year before, AND the previous 4 years average Sep-Q of 66 days.<br /><br />This was why their Gross Margin looked awesome (37.3% vs. 30.5% in the previous year). They were running flat out on production and building inventory.<br /><br />Why?<br />Well perhaps they were looking towards a gangbuster Dec Q.<br />Or perhaps they wanted to flatter the margin.<br /><br />We won't know until they tell us exactly how great their Xmas performance was on Jan 26.<br />(Although I won't be getting up at 3am to find out in real time...)<br /><br />On the "good Q for peripherals" I think it is just a bounce back towards "normal".<br />The beat was mostly mice and keyboards and if you look at the previous run-rates, they are still way off Sep-08 numbers.<br />Mice $154m vs. $221m<br />Keyboards $95m vs. $138m<br /><br />While the long term trend is clearly negative for mice and keyboards for all the obvious reasons, you need to be confident that the current "return to normal" bounce back isn't too much!<br />Of course 2008 is likely to be the peak for those categories but I suspect 2010 will be the medium term trough.<br /><br />You still have laptop cannibalisation requiring a retail mouse/keyboard purchase rather than OEM (consumer wants a kind of laptop docking station to replace old desktop). And that favours LOGI.<br />The iPadification of the world suits Logitech too since tablets need peripherals as much as or more than laptops (speakers for example).<br />Remotes are too small to matter.Nickhttps://www.blogger.com/profile/01164675502109841117noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-13092832673974941422011-01-10T20:09:33.424+11:002011-01-10T20:09:33.424+11:00Really. Remote controls will be an iphone app. R...Really. Remote controls will be an iphone app. Remotes are a big part of Logitech - and one of the few growing categories.<br /><br />Mouses are a touch app. They go in as pointing devices. They disappear into touch screens - even on your app.<br /><br />Eventually the Connect is a gesture reader. <br /><br />Docks should standardize - an iphone one and an everything else one or two. <br /><br />I could be wrong - and Stableboy could be wrong - but this looks awfully like cables to me. <br /><br />And I still can't see why Radioshack is in business - but it is and it is...<br /><br />JJohn Hemptonhttps://www.blogger.com/profile/03766274392122783128noreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-84441482025500608302011-01-10T18:25:28.886+11:002011-01-10T18:25:28.886+11:00John,
A problem with your (and Stableboy's an...John,<br /><br />A problem with your (and Stableboy's analysis) of Logitech is that it's core premise ... that the move to laptops and smartphones will reduce the market for peripherals ... is questionable.<br /><br />The emergence of the iPhone/iPod led to a substantial market for docks - one in which Logitech is a significant player.<br /><br />Likewise, there is a growing set of "laptop specific" peripherals (e.g. cooling lap-desks and USB docks). And as new technologies are enabling a "one cable" USB dock viable, demand for keyboard and mouse sets for docked laptops and smartphones can be expected to rise (and that isn't even counting the fact that even TVs now come with a keyboard option).<br /><br />SBAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-4815867514277794362.post-40085895335876341702011-01-10T16:18:48.176+11:002011-01-10T16:18:48.176+11:00fwiw -- managed to destroy a laptop screen travell...fwiw -- managed to destroy a laptop screen travelling so instead hooked it up to the t.v. in my home gym and found that all i needed to browse while on the treadmill was. . .a wireless mouse. . .(supplied, as it turns out, from logitech)<br />i suppose there will be lots of fantastic things that true internet tvs will do, but for my world if my choice is upgrading a perfectly good Samsung flat panel OR buying a $40 logitech mouse, then i am going for the latter. . .WBnoreply@blogger.com