The Indirect VoIP Play, Audiocodes

Indirect VoIP play, Audiocodes (AUDC) seems to be winning big because of increase in VoIP spending. The company reported 1Q 2005 sales of $26.9 million and EPS of $0.07. Even though carriers are being as stingy as Billy Beane, they are still willing to spend on VoIP. Audiocodes, an Israeli company makes media gateway, server and processing technologies, and has fast growing chip and software business. The company says it has won several tier- one design wins for cable VoIP in Latin America, Europe, and two new media server wins in North America. The company is spending heavily on R&D, and as a result IRG Research expects the revenues to take a slight dip in the near term. Keep an eye out on this one!

Chips tell the story

Ever since Cisco and HP announced their poor results, investors have been reacting with a sense of panic, and lot of hand-wringing. It is a little late now, because they ignored the disaster signals coming from the semiconductor sector. The chip equipment makers like KLA-Tencor have been warning about slowing sales for a while. When their sales slow, it means that chip foundries are not buying, because in turn they are seeing slowdown in orders from their customers, mostly fabless chip companies. In other words, chip equipment order book acts like an early warning system for what is going to be an industry wide problem. National Semi cut its forecast yeaterday. Cisco’s rising inventories means that there will little growth in the business of companies like PMC Sierra, Broadcom and others who supply to Cisco.

This morning, Ren Zamora, analyst with Loop Capital wrote, “A stronger case is being made that year-over-year technology growth is slowing more than we originally expected. Near-term, we are less comfortable with the concept that inventory builds are growing to prepare for an increase in customer demand.” His action: cut estimates for Texas Instruments which sells a ton of chips for all things that are supposed to be much in demand: cell phones, DSL modems, VoIP gear, handhelds and other musical gear. Zamora’s actions suggest well these devices are not going to be as hot in the near term. Vishesh points to a good round up on The Washington Post, and writes, “Anyone else get the feeling that the 2003 recovery might be fading? Rember the 2001 debates about whether it would be a “V” shaped or “W” shaped recovery… i.e. would we dip again? Feels like it might be the later.”

200 Gig IPod?

Not anytime soon, but some day in the near future one could expect IPod with a massive 200 GB drive, and one would have to thank PMR for it.

Perpendicular magnetic recording (PMR) will be the next big leap in the hard drive storage technology, and while it is too early to predict its long term business implications, the hard disk drive makers are banking on this new technology. Why? because it changes the current status quo of profitless prosperity in the HDD industry. From 1990 through 2002, HDD makers have given customers more of the same. HDD capacity increased by a compound growth rate of 93% per year, with equally spectacular price declines.

The reason it was made possible was due to industry’s move from oxide media to thin film media. Then, in the early 1990’s, in quick succession, the readback heads – which were inductors akin to miniature electrical transformers – were repand then by giant magnetoresistive (GMR) heads.

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