From Briefing.com: Tech stocks, like the broader market, began the day under water after Tuesday's rally. Shares traded in a narrow band as investors weighed the implications of Wednesday's batch of earnings in view of the Fed decision. With no material negative news, shares assumed a modest upward bias and managed to break the surface around 1:30pm ET, trading in an almost identical range topside.
Thursday's trading will focus on: ChipPAC (CHPC 7.29 -0.48), which reported Q3 results after Wednesday's close and offered a fairly positive outlook for semiconductor packaging and testing; BMC Software (BMC 15.66 +0.14), Ericsson (ERICY 18.64 +0.74), both reporting before the open; and GlobespanVirata (GSPN 6.68 +0.52), which reports after the close. Looking beyond Thursday, with few earnings reports to keep investor attention in tech, we think tech shares are in for some quiet time until next week when Cisco (CSCO 20.82 -0.08) and Qualcomm (QCOM 47.52 +0.52) report results.--Ping Yu, Briefing.com
5:54PM Wednesday After Hours price levels vs. 4pm ET: The after hours trade has been unable to maintain the slightly positive stance it exhibited during the regular session, turning negative as buyers have lacked conviction. Presently, the S&P 500 futures, at 1045, are 2 points below fair value, while the Nasdaq 100 futures, at 1419, are 3 points below fair value. Tonight's earnings reports were mostly better than expected, although none of them showed the upside surprise the market needed to sustain its gains.
The arguable headliner of the evening, professional services firm EDS (EDS 22.00 +0.15), matched the Q3 (Sept) Reuters Research consensus EPS estimate of $0.32. The company, however, fell short of the top-line consensus expectation of $5.35 bln, with revenues dropping 2% to $5.24 bln. EDS said that it signed $3.4 bln in contracts versus $3.0 bln a year ago, driven by activity in the government and manufacturing sectors. The company added that it remains on track to meet its guidance for 2H03, including estimated pro forma earnings of about $0.70. Competitors of EDS include the likes of ACN, ADP, CSC, HPQ, and IBM.
Provider of semiconductor services ChipPAC (CHPC 8.00 +0.71) has turned in one of the biggest moves to the upside following its Q3 (Sept) report. The company met Wall Street's consensus forecast calling for a net loss of $0.07, but then guided its Q4 (Dec) outlook to breakeven to a gain of $0.02. The Reuters Research estimate was pegged at breakeven. Management said that 'all segments of our business are showing improved utilization rates in Q4, with utilization now greater than 75%.' Briefing.com looked for a more positive outlook relative to management's cautious tone going into the quarter in our preview of ChipPAC's quarter (see earlier Story Stock).
10:11AM ChipPAC (CHPC) 7.65 -0.12: ChipPAC is scheduled to report Q3 results after the close Wednesday. Reuters Research pegs Q3 consensus EPS at ($0.07) on revenue of $107.1MM and Q4 at $0.00 on $114.6MM; C03 EPS at ($0.21) on $417.1MM (+14.7% year-over-year) and C04 EPS at $0.27 on $510.5MM (+22.4% year-over-year).
Management is finalizing the end stages of a company-wide restructuring aimed at taking out costs and improving efficiency, laying the foundation for material margin expansion as capacity utilization increases. ChipPAC's utilization rate was 68% in Q2, but with front-end capacity utilization rates rising industry-wide, and strong demand for consumer electronics, laptops and wireless products, momentum is in ChipPAC's favor and capacity utilization should be moving up to the high 70% to low 80% range. Look for ChipPAC's growth to accelerate as the industry upturn gains momentum, because of greater contribution from China (ChipPAC's largest and fastest growing market with a CAGR (compound annual growth rate) of 45%) and as ASPs (average selling prices) stabilize on higher capacity utilization. Combined, these forces will result in margin expansion and upside to consensus. As well, look for a more positive outlook relative to management's cautious tone going into the quarter.
Valuation
Shares trade at 1.8x C03E revenue of $417.1MM and 1.5x C04E revenue of $510.5MM; 28.3x C04E EPS of $0.27. On a DCF/EVA basis, ChipPAC's valuation is pricing in 20% top-line growth over the next 10 years and 2000bps in margin expansion.--Ping Yu, Briefing.com
Akamai Technologies (AKAM 7.37 +1.41) has also found investors receptive to its Q3 (Sept) report as shares have surged 23%. Akamai reported a net loss that narrow 77% quarter/quarter, to $0.03 per share, which was $0.04 better than the Reuters Research consensus of ($0.07). Revenue increased more than 10% to $41.8 mln, and the provider of services and software also achieved positive free cash flow of $2.6 mln.
Shares of Netcreen (00C0 25.92 +1.58) have also shown some upside momentum following the company's Q4 (Sept) report. The developer of integrated network security solutions surpassed the top and bottom-line consensus estimates, and said that it saw Q1 (Dec) sequential revenue growth of 7-9%, or $76.6-$78.0 mln, versus the consensus of $76.67 mln.
Finally, Newport (NEWP 15.90 -0.49) stock has stumbled 3% following the global supplier of technology products and systems's Q3 (Sept) revenue miss. Sales were $31.5 mln (consensus of $32.7 mln) and new orders were $37.0 million compared with $38.4 mln in the prior year period. The company noted 'certain shipments we had originally expected to ship in Q3 shifted to Q4 (Dec) of this year and beyond.' Related companies of NEWP include the likes A, ASYT, and BRKS.
For complete coverage on these, and other developments, be sure to visit Briefing.com's In Play, Earnings Calendar, and Guidance pages. -- Heather Smith, Briefing.com
5:00PM ESS Tech guides Q4 above consensus (ESST) 13.35 +0.38: -- Update -- Company sees Q4 EPS of $0.10-0.13, vs R.R. consensus of $0.06 on revs of $65-68 mln vs consensus of $54.6 mln. Please see the 16:35 comment for the full earnings report.
4:35PM ESS Tech reports $0.13, non GAAP (ESST) 13.35 +0.68: Reports Q3 (Sep) non GAAP earnings of $0.13 per share, $0.16 better than the Reuters Research consensus of ($0.03); revenues fell 20.6% year/year to $48.2 mln vs the $41.2 mln consensus. Company states "Both GAAP and Non-GAAP net income for the third quarter of 2003 include approximately $8.7 million of tax benefits." Prelim indication from Reuters is that $0.13 actual is comparable to consensus, we are in touch to confirm.
4:36PM Newport reports in-line EPS, revs light (NEWP) 16.39 +0.66: Reports Q3 (Sep) loss of $0.07 per share, in line with the Reuters Research consensus of ($0.07); revenues fell 30.8% year/year to $31.5 mln vs the $32.7 mln consensus.
4:27PM Photon Dynamics misses by $0.02, ex items; guides in line for Q1 (PHTN) 32.90 +0.95: Reports Q4 (Sep) loss of $0.12 per share, ex items, $0.02 worse than the Reuters Research consensus of ($0.10); revenues rose 61.9% year/year to $21.0 mln vs the $20.0 mln consensus. Co. sees Q1 (Dec) EPS of a loss of $0.03 to a gain of $0.03, estimate is a loss of $0.01 and revenues of $21-23 mln, estimate is $21 mln.
4:19PM ON Semiconductor reports in line (ONNN) 4.96 +0.21: Reports Q3 (Sep) loss of $0.12 per share, in line with the Reuters Research consensus of ($0.12); revenues rose 3.4% year/year to $264.8 mln vs the $259.4 mln consensus. Company comments on Q4, says "While we believe that we can grow revenue in the fourth quarter, we expect that our gross margins will remain roughly flat as compared to the third quarter".
4:03PM ChipPAC reports, guides in line (CHPC) 7.30 -0.47: Reports Q3 (Sep) loss of $0.07 per share, in line with the Reuters Research consensus of ($0.07); revenues rose 11.3% year/year to $105.4 mln vs the $107.1 mln consensus. Company sees Q4 EPS of breakeven - $0.02 gain, consensus is $0.00.
12:50PM Seagate Tech provides update regarding SEC request for info (STX) 24.25 +1.35: Co provided an update to the recent investigatory request by the SEC for third-party research analyst reports on the company from January 1, 2000 through August 30, 2003. On October 28, 2003 the co received additional information from the SEC regarding the focus of their initial investigatory request. Co believes the SEC is examining the allegations raised by a former employee that was terminated as previously disclosed in IPO prospectus. The former employee has alleged he was dismissed b/c he asserted co had incorrectly reallocated certain expenses between costs of goods sold and research and development costs in its financial statements. The reallocations, which the co did record, were related to a broad restructuring that changed the focus of activities at various locations as between manufacturing and research and development. These reallocations had no impact on either revenues or earnings and were detailed in financial statement contained in the IPO prospectus.
10:28AM Moors and Cabot on UMC : Moors and Cabot provides key takeaways from UMC's earnings with respect to AMAT and Semi Cap Group. On UMC, the firm notes, utilization rate was 84%, down from 85% in 2Q03 and below its expectation of 90%. Firm believes companies like XLNX, ATYT and Mediatek were leading drivers for strength in the quarter. The firm views the cap ex push-out as a neutral event based purely on timing of payments. Moors and Cabot believes the tone on the call was clearly more positive and it is clear that UMC's cap ex plans will likely be trending upwards in 2004, even without accounting for the push-out. The firm believes AMAT has the greatest exposure and highest leverage to an increased cap ex plan by UMC with its FY04 estimates likely to be understated given the ramp by both UMC and TSMC. Other beneficiary's in its coverage universe include CYMI and beneficiaries not in its official coverage universe include ASYT and LRCX.
9:48AM Dell Computer upgraded at AmTech (DELL) 36.00 +0.02: American Technology Research upgrades to Buy from Hold, saying they are increasingly confident that DELL's business continues to improve, especially in key enterprise and global mkts; firm is particularly impressed with the pickup in enterprise systems, storage, and especially services, which they believe rates amongst the strongest segments for DELL in their upcoming Oct qtr; co has begun to comment favorably on its involvement with "utility computing," they regard the broadening of the sales relationship with EMC and the partnering with EDS on the myCOE program as positives, they believe that DELL has experienced good growth in global mkts, and overall unit demand for PC's (both desktops and notebooks) has been robust this fall.
9:05AM Sanmina-SCI upgraded at Needham (SANM) 10.02: Needham upgrades to Buy from Hold, saying demand across the board is increasing faster than expected; firm believes that SANM is perfectly positioned to leverage the vertical manufacturing EMS business model in the prolonged economic recovery they envision, since its component areas (high-end PCBs and enclosures, backplanes, cabling, memory modules) can contribute over a 20% gross margin and 10% operating margin. Target is $13.
8:57AM Vishay misses by $0.03, ex items, misses on revs (VSH) 19.87: Reports Q3 (Sep) earnings of $0.06 per share, excluding multiple ex items amounting to ($0.02), $0.03 worse than the Reuters Research consensus of $0.09; revenues rose 13.1% year/year to $533.2 mln vs the $543.5 mln R.R. consensus and the $545.0 mln First Call consensus.
Bell Micro (BELM) 8.50 -0.46: Before the open, reported Q3 (Sep) earnings of $0.02 per share, in line with the Reuters Research consensus of $0.02; revenues rose 0.7% year/year to $555.5 mln vs the $555.0 mln consensus. Company says Q4 is seasonally strong quarter, expects "sequential improvement over Q3."
Conexant (CNXT) 6.20 +0.37: Co announced that EchoStar Communications (DISH) has selected Conexant's recently announced, single-chip set-top box solution for use in their new low-cost, high-volume set-top box satellite receivers
Maxim Integrated (MXIM) 48.24 +0.99: Soundview upgraded to Outperform from Neutral and raised their target to $57 from $37, saying the strength of the co's backlog provides good visibility and higher ests for the March qtr; firm thinks the co's plan to allow gross margins to decline in 2005 is likely to create some controversy, but they that feel better rev growth opportunities coupled with stable operating margins are likely to create EPS upside.
OmniVision (OVTI) 59.14 +10.77: Before the open, co announced it expects Q2 EPS and revs to meet or exceed $0.30 and $65 mln vs prior guidance (provided Aug 20) of $0.22-$0.23 and $48-$50 mln. Reuters Research consensus is $0.24 and $51.1 mln. OVTI cites strong demand from the digital-still-camera, video-game, and cell-phone markets.
O2Micro (OIIM) 18.88 +1.05: After the close, reported Q3 (Sep) earnings of $0.10 per share, $0.03 better than the Reuters Research consensus of $0.07; revenues rose 28.9% year/year to $23.2 mln vs the $22.1 mln consensus.
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