Time to cut Spreadtrum SPRD loose

I felt lucky I did sell some Spreadtrum (Nasdaq:SPRD) shares a short while ago when it exceeded $6 (a quick pop). But I don’t know why I bought some back couple days ago at $4.48. I did not bet on earning these days, but this one had dropped quite a bit from the pop, and the expectation is low. So I thought I am relatively safe. Remember margin of safety.

Well, it turns out semi-conductor stock has no MoF. Remember a while ago the star player nVidia (NVDA) fall out from the graphics chip quality problem? My small speculation player SPRD also fell off cliff. Here is the results.

To be honest, I think 2Q results was OK, but the 3Q forecast is disaster. Quote press release: Spreadtrum currently expects revenue in the third quarter to be approximately US$20 million, which represents a sequential decrease of approximately 50% from the US$40.2 million in the second quarter of 2008.

I am not going to do any fundamental or valuation analysis. It seems to me the management (that means Dr. Wu Ping and his associates) blew up badly on this one. The business itself probablly still has some value, but I lost a lot (blind) trust on management team. So I am going to sell all my shares tomorrow morning. Take a loss 🙁

Appendix: more quotes from Press Release

Accounts receivable (A/R) increased from US$1.4 million at March 31, 2008 to US$17.4 million at June 30, 2008, as the Company extended credit terms to some select customers in 2Q08.

I should have known this coming because couple days ago I read one of SPRD custoemr, Amoi just reported a very bad 2Q and 1st half of 2008.

Another lesson learned:
Looking back, I entered this postions a week ago, partially due to read this analyst report. Should have done my own homework (e.g., the disappointing 1H 2008 report from Amoi, key customer of SPRD), not trust those analysts who wrote reports for a living 🙂

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