Price decline in January

[Steve Daly]

Spreadtrum's price declined in January from an average of $21 per
share to $15 primarily because of the RFMD warning that obliquely
blamed the loss on a drop off in China 2G cell phone markets.
However, following the earnings report, in the 4th quarter conference
call, RFMD stated that the missed revenues were due to an expected
ramp up in December cell phone production prior to the New Year
holiday shutdown, a ramp up that never materialized. Following the
earnings shortfall, Jefferies spooked investors with an underperform
rating on SPDR and a target price of $11.70.
Was RFMD avoiding an admission of loss of market share?
Spreadtrum only provides RFMD chips in a minority of product
offerings. Spreadtrum both integrates power into its basebands and
provides radio frequency chips from its wholly owned Quorum
subsidiary.
RFMD most likely was losing some market share to Spreadtrum. Time
will tell if this was a significant loss and if RFMD was losing to
other competition.
Fidelity approximately doubled its ownership in SPRD in January.
If Spreadtrum was oversold in January and snaps back to the $20 level,
by then we may have better visibility with how markets are growing.