Author Topic: SMCI - Super Micro  (Read 6484 times)

DTEJD1997

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SMCI - Super Micro
« on: August 22, 2018, 06:19:54 PM »
Hey all:

Anybody else familiar/watching/invested in this company?

I used to own it years ago...I will use their products from time to time.  I find their product to be somewhat above average, but not great.  I find my customers are receptive to their product, but once again, not a top tier brand.

Fast forward to today.  The stock hit a new 52 week low $14.20/share.  This is because the company will not be able to file their annual report on time, and thus will be removed from NASDAQ.

The company has been around for a long time, and ships product.  I don't think it is a fraud, but it is troubling that this relatively simple business can't get their financials under control and out on time.

SMCI has also suffered from high DRAM prices.  They also have some amount of margin compression.

Countering this is a relatively healthy balance sheet and strong sales growth.

Analysts think the company could earn well over $2/share in the upcoming year.

Anybody have any thoughts/opinions on this?
« Last Edit: August 23, 2018, 03:00:19 PM by Parsad »


clutch

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Re: SMCI Super Micro
« Reply #1 on: August 22, 2018, 07:35:04 PM »
Definitely not the best business/brand in the world... Doesn't seem to have much of a moat and it's in a commodity-type business.

But they got the industry headwinds for sure. I think the demand for servers, data storage, racks, HPC, etc. will continue to grow and grow... So just based on that factor it might be worth trading this name.

VAL9000

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Re: SMCI - Super Micro
« Reply #2 on: October 04, 2018, 05:39:38 AM »

An alarming article covering Super Micro:
https://www.bloomberg.com/news/features/2018-10-04/the-big-hack-how-china-used-a-tiny-chip-to-infiltrate-america-s-top-companies?srnd=businessweek-v2

Perhaps the next recession will be fomented by the painful and costly reorganization of the  global technology manufacturing supply chain.

oddballstocks

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Re: SMCI - Super Micro
« Reply #3 on: October 04, 2018, 08:29:54 AM »
People love the servers.  They are barebones, and dirt cheap.  Quality is somewhat suspect.

Their IPMI module is junk, as evidenced from the Bloomberg article.
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Spekulatius

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Re: SMCI - Super Micro
« Reply #4 on: October 04, 2018, 09:15:24 AM »
So the company is toast now? The article is quite alarming since putting this kind of spy hardware into the servers requires coordination and collusion on so many levels.
1) design and produce a spy chip
2) Make it work on targeted motherboard without detection
3) inject the t into a manufacturing line undetected by quality control systems ( or make sure they collide with you).

It seems that this company must have design engineers in the US colluding with the Chinese.

I think all western companies need to rethink  about ITAR level security on their components as well. ITAR level work requires US persons only. Components even in military hardware are often not ITAR to save costs.

Then what about spy chips in smartphones also used by government officials? Yes we need to think about security much more bradly and possibly require hardware used by the government to be completely yuk in friendly countries. I could envision Apple to build a model of the iPhone this way. In the long run, revelations like this will cost the Chinese dearly, imo.
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oddballstocks

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Re: SMCI - Super Micro
« Reply #5 on: October 04, 2018, 09:45:19 AM »
So the company is toast now? The article is quite alarming since putting this kind of spy hardware into the servers requires coordination and collusion on so many levels.
1) design and produce a spy chip
2) Make it work on targeted motherboard without detection
3) inject the t into a manufacturing line undetected by quality control systems ( or make sure they collide with you).

It seems that this company must have design engineers in the US colluding with the Chinese.

I think all western companies need to rethink  about ITAR level security on their components as well. ITAR level work requires US persons only. Components even in military hardware are often not ITAR to save costs.

Then what about spy chips in smartphones also used by government officials? Yes we need to think about security much more bradly and possibly require hardware used by the government to be completely yuk in friendly countries. I could envision Apple to build a model of the iPhone this way. In the long run, revelations like this will cost the Chinese dearly, imo.

Well, the chip took over the IPMI, then had it connect and download a bigger payload.

To expand on the earlier comment the IPMI is a super level chip that watches the system.  This is how you get lights out management.  There is system on a chip that is almost a second computer.  It will have a dedicated ethernet port and runs even if the server is turned off.  As long as they're power the IPMI/remote management is running.

This has a legitimate purpose. You can remote into any machine and view it as if you are there in person, but it doesn't rely on the computer's subsystem itself.  We do this with our servers (not SuperMicro).  If something goes terribly wrong you can always get to the machine.  The only time you need to physically visit a datacenter is for hardware upgrades.

SuperMicro's remote stuff was notoriously bad.  It's wide open to the world by default.  That means if you buy a SuperMicro and plug it in without firewalling off the ports ANYONE can take over the machine.  No talent is required.

Here's how I believe this works.  The little chip attacks a vulnerability in the remote management.  When the machine is powered on it dumps a payload the SoC stuff.  All you need are a few bytes.  It adds a phone home to a malicious cloud, and from there since a socket is established it can pull in a larger payload that's more complicated.

Think of it like this. That chip just needs to open the door, once the door is open the attacker has a vector they can use.

SuperMicro isn't alone.  This stuff is rampant.  Look on eBay at Intel x520 NIC's, probably 60-70% are counterfeit from China.  There is speculation that most of these are seeds.  The hardware looks slighly different, and you really don't know what they're doing.  The same is true with ethernet switches.  Again on eBay there are a lot in China that appear to be new, or slightly used that are dramatically cheaper.  The suspicion is that these are compromised components that they're tryign to get into foreign networks.
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Foreign Tuffett

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Re: SMCI - Super Micro
« Reply #6 on: October 05, 2018, 07:23:00 AM »
@ $13 per share I think the market cap here is somewhere around $640 million. For $640 million you are buying:

$22 million in net debt (94 million cash - 116 million debt).

Based on the 6/30/17 balance sheet the company is close to being a net-net. Assuming no inventory write-offs, it probably is a net-net at this point given the growth that they showed last fiscal year.

FY 2018 results (ended 6/30/2018): $3.3 billion in revenue, at least $428 million in gross profit, and a minimum of $1 per diluted share GAAP earnings.

2 million sq feet of real estate in San Jose, CA + a manufacturing facility in Taiwan.

Obviously this is a speculative situation (do you own due diligence!), but I think a case can be made for buying this here.

LongHaul

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Re: SMCI - Super Micro
« Reply #7 on: October 05, 2018, 07:36:11 AM »
I guess now we know why they are called SUPERMICRO!


mcliu

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Re: SMCI - Super Micro
« Reply #8 on: October 05, 2018, 07:49:10 AM »
Will customer still use their products after this Bloomberg piece?

oddballstocks

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Re: SMCI - Super Micro
« Reply #9 on: October 05, 2018, 08:41:30 AM »
Will customer still use their products after this Bloomberg piece?

That's the risk I see, reputational risk.  If it's a net-net now imagine where it will be after a few quarters of low growth?
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