Anila Prakash contributed to this note. 

Drilling companies report in Jan-08 about many deep-water drilling contracts yielding high return on investments 

Gridstone Research covers 15 drilling companies within its current coverage universe of 129 oil and gas companies. Some of the drilling companies report deals struck for new rigs and new contracts on old rigs on a regular basis. This note makes an effort to look at the impact of the contracts on the earnings that these drilling companies will report in the future, during the tenure of the contract. read more…

Logitech International S.A (NASDAQ:LOGI), Plantronics, Inc. (NYSE:PLT) and Synaptics, Inc (NASDAQ:SYNA) are among the peripheral vendors covered at Gridstone Research. A quick analysis of the revenue and operational metrics disclosed by the three vendors provides two interesting insights.

• Robust PC industry growth, led by notebook shipments, leads to interface peripherals growth. Such peripherals include pointing/interface devices such as Mice, Keyboards, Remotes and Touch Pads.
• Multimedia peripherals had a poor quarter. Multimedia peripherals include headsets, PC speakers, docking audio, gaming peripherals and webcams.

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Arpita Lulla and Vishal Kapse also contributed to this Note
Ongoing credit crisis and continued weakness in the housing market resulted in lower than expected January ’08 comparable store sales performance across all retailers. Customers continued to feel pressured and chose to spend on consumables rather than on high ticket items.
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Vishal Kapse also contributed to this Note
Amazon.com Inc., the world’s largest internet retailer, reported its fourth-quarter results on 30 Jan-08. Revenues grew 42% y/y for the QE Dec-07 due to strong sales in electronics, toys, soft goods (which includes jewelry, apparel, shoes) and sporting goods. Net income also posted a strong growth of 111% y/y and diluted EPS increased 109% y/y to $0.48 from $0.23. Even so, Amazon’s stock price was punished by investors – the stock fell from $77.70 on 31 Jan-08 to $72.09 on 5 Feb-08. We believe that this is because investors are disappointed by the lowered margin outlook provided by the company.
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Sandeep Mukherjee and Sneha Khatri also contributed to this Note

Sales Mix Shifts towards Passenger Cars

Most of U.S. automakers, with an exception of the market leader GM, reported decline in y/y sales during January 08. Automakers reported a decline of 4.4% y/y in total light vehicle sales to 1.04 M units. The industry witnessed discernible product mix shift towards passenger cars vis-à-vis light trucks, given the stressed credit market, housing and construction sectors and higher fuel price levels. Market players with strong product line up in the car segment benefited from this product mix shift.

Among US automakers, GM posted an increase of 2.1% in sales while Ford reported 4.1% y/y decline in sales with both car and truck sales declining. US automakers increased their market share in US to 51.2% from 50.6%. Non-US automakers reported decline in sales as well as 30 bps decline in their market share to 41.9% from 42.1%. The US industry recorded an estimated seasonal adjusted annual rate (SAAR) in the range of 15.2 – 15.5 M units of cars and light trucks in Jan08. read more…

Kavita Keyur Morparia contributed to this note 

There has been a perception that oil companies have returned a higher share of cash flow to shareholders rather than investing in the core business of exploration and production of crude oil. This has been suggested as one of the reasons for the lack of adequate growth in supply and hence a cause for higher oil prices. At $90/bbl of oil prices, it is therefore worthwhile to look at “whether oil and gas producing companies focused more on buying back shares as compared to putting money into their operations?” read more…

Vijay Fernandes and Dipali Pujara also contributed to this note

In continuation to our previous note on ‘North American Telecom capex’,
we have extended our analysis of capex review to Asian telecom companies. We have compiled capex and revenue trend for 10 Asia-Pacific companies for this analysis and have done a quick analysis of capex of five major Asia-Pacific telecom companies.

Capex as a percentage of revenue for countries in Asia-Pacific has slowed down in CY07 in regions with high wireless penetration as well as moderate penetration. The decrease can be attributed to high penetration leading to a slowdown in network expansion. An overall average of the seven wireless companies in Asia-Pacific places capex as a percentage of revenue at 19% for the nine months of CY07, compared with 23% in CY06.

Capex as a percentage of revenue for companies providing wireline services in Asia-Pacific has shown a declining trend over the past two years. An overall average of the six wireline companies in Asia-Pacific places capex as a percentage of revenue at 18% for the nine months of CY07, compared with 20% in CY06. read more…

Update(February 28th,2008) - Mid-quarter update from WDC

“…The Company’s performance thus far is better than originally anticipated going into the March quarter, based on strong execution and its leading product and technology portfolios. The Company now expects revenues in the March quarter in the range of $2.0 billion to $2.075 billion (which includes approximately $75 million in media and substrate sales), gross margin of approximately 22% and earnings per share of between $1.05 and $1.11. This compares with revenue of $1.4 billion, gross margin of 15.8% and earnings per share of $0.53 in the year-ago quarter.”

Seagate Technology Inc (NYSE:STX) and Western Digital Corporation (NYSE:WDC) reported strong results for the QE Dec07. Both achieved strong volume growth and significant margin expansion to showcase (See Exhibit I). These results augur well for the PC makers HPQ and DELL who will announce their quarterly results on Feb 19th and 28th respectively. read more…