According to the article, 2% of Synaptics' revenue comes from Apple. 2%!. So why did the stock price drop 12%? Why did Chicken Lit... er, Bear Stearns lower their predicted share price from $53 to $49?

It's really hard to take these people seriously.

As the article states, PowerBooks account for 2% of their notebook trackpad revenue.

Since PowerBooks are only a third of Apple's notebook sales, one can safely assume that Apple accounts for 6% of their notebook trackpad revenue. Using the numbers quoted in the article and assuming all notebook trackpads have similar cost, we can extrapolate that Synaptic ships 7.6 million notebook trackpads a quarter. For this exercise, let's assume that iPods represent 90% of their non-notebook sales, for an estimated 5 million units/qtr.

This scenario would mean they ship 12.6 million units/qtr, and Apple is 5 million of those, or 40%. So, the firm relies on Apple for 40% of their revenue, and Apple has just made a move that strongly indicates a strategy that will annihilate that over the next product generation cycles.

Their valuation dropped 12% on news that 40% of their revenue is highly at risk. What's so hard to take seriously about that?

THe article says Powerbooks is 2% (not all APple). In fact based on last quarter numbers:

Powerbooks (152K Units) is the 2% mentioned.
iBooks (271K Units) that would be around 3.56% then,
and iPods (4580K units) that would be an extra 60.2 %.

So, this company is Apple dependant. More iPod than Apple, but if the PBs are any indication, they are about to loose a client that represents 65.70% of theirs sales.

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Steve W wrote:
According to the article, 2% of Synaptics' revenue comes from Apple. 2%!. So why did the stock price drop 12%? Why did Chicken Lit... er, Bear Stearns lower their predicted share price from $53 to $49?

It's really hard to take these people seriously.

Re-read the article, it does address why Bear Stearns trimmed their target. The concern is "whether this will lead to a change in strategy for iPod." The iPod is responsible for much of Synaptics' recent stock run-up, so it makes sense that concerns about whether the company would continue to supply parts for the iPod (which, presumably, accounts for a larger share of the company's revenue) would cause them to trim the target.

Why what is now (3:26 pm) a 15% drop? It could be the market overreacting, in which case Synaptics might be an attractive buy. Or perhaps there is real cause for concern. Alas, only time will tell.

Of course, the burning question is - if Synaptics isn't making the trackpads, who is? And what is their stock doing right now?

I don't see the new scrolling trackpad being applicable to the iPod, which seems inseparable from the scroll-wheel. So it seems to me that the worry Synaptics has would be solely on the notebook front?

OK, my math isn't good. My point, however, is summed up by this sentence:

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Should Apple move its iBook and iPod lines to its custom trackpads, the effect on Synaptics bottom line could be significant.

The stock dropped and Bear Stearns lowered earning expectations based on mere speculation from an anal-yst who's probably wrong more than he's right. This is nuts.

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Steve W wrote:
OK, my math isn't good. My point, however, is summed up by this sentence:

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Should Apple move its iBook and iPod lines to its custom trackpads, the effect on Synaptics bottom line could be significant.

The stock dropped and Bear Stearns lowered earning expectations based on mere speculation from an anal-yst who's probably wrong more than he's right. This is nuts.

The stock market is based on speculation. What's so nuts about it?

Apparently, some people think he's analyst makes sense. If you think he's wrong, then buy the synaptic stock at a discount right now.

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Guest wrote:
I don't see the new scrolling trackpad being applicable to the iPod, which seems inseparable from the scroll-wheel. So it seems to me that the worry Synaptics has would be solely on the notebook front?

I believe the concern is that for some reason Apple went with an internally-derived design for their new trackpad instead of an existing solution from Synaptics (assuming there is one). So, does this presage a wider drive by Apple to go from vendor parts to internally designed parts?