From Briefing.com: General Commentary - Tech shares moved 1.1% higher on Monday. Advancers led decliners by a 2:1 margin, with gainers rising 3.2% and losers falling 2.6%. Investors were cheered by a) news that October Semiconductor sales rose 6.8% Q/Q, b) a good Black Friday/start to the holiday shopping season, and c) a stronger than expected November ISM Index of 62.8 (vs. consensus of 57.0), which suggested manufacturing employment will start to rise. Continuing strength within the building market also provided investors with some level of confidence. Construction Spending came in at 0.9% vs. consensus at 0.5%.
Investors are shifting focus from last quarter's earnings to the current quarter and the next 12 months. Looking ahead, there is reason to be optimistic as detailed in the Big Picture. Even in tech, where valuations appear stretched, attractive names can be found. One methodology for finding attractive investment ideas is to identify the company or companies that are particularly well positioned to capitalize on secular trends that form and define large market opportunities. For example, as profiled on Monday's Story Stock page, Sandisk (SNDK 79.06 -1.76) is particularly well positioned to benefit from the trend to digitize and make mobile every day processes from computing to picture taking to video viewing.
For short-term trading ideas, we will continue to identify names that have dropped below their lower volatility band or risen above their upper volatility band (listed below). The volatility bands represent the "normal" low and high trading range for a given company, and serve as generally entry/exit points. Shares that trade below or above the bands will generally revert to the mean/"normal" range. Note that during periods of high volatility, or in the event of material news, a company's share price may move significantly beyond the bands.--Ping Yu, Briefing.com
Names that have dropped below their lower volatility bands and may rebound:
Company (Ticker) Close Change % Change
American Power Conversion (APCC) 22.86 +0.90 +4.1%
BCE (BCE) 22.10 -0.27 -1.2%
Cray (CRAY) 9.63 -0.77 -7.4%
ECtel (ECTX) 5.13 -0.07 -1.4%
Merisel (MSEL) 6.00 +0.10 +1.7%
NetScout Systems (NTCT) 8.35 -0.18 -2.1%
QAD (QADI) 12.66 +0.33 +2.7%
RADVision (RVSN) 11.54 -0.83 -6.7%
Rockford Group (ROFO) 5.80 -0.05 -0.9%
Rural Cellular (RCCC.OB) 8.15 -1.30 -13.8%
Names that have risen above their upper volatility bands and may consolidate:
Company (Ticker) Close Change % Change
Alcatel (ALA) 13.37 +0.35 +2.7%
Commonwealth Telephone (CTCO) 37.51 -0.11 -0.3%
Comtech Telecom (CMTL) 33.90 +0.56 +1.7%
Equinix (EQIX) 27.39 +0.68 +2.6%
Evolving Systems (EVOL) 18.35 +1.25 +7.3%
7:05PM Micron: Texas Instruments sells remainder of its Micron holdings (MU) 30.18 +0.42: Texas Instruments has completed the sale of its remaining shares of Micron Technology common stock. Late last month, TXN sold approx. 3.2 mln shares of Micron and today sold 29.1 mln shares, for a total of 32.3 mln sold in Q4. TXN will recognize a pre-tax gain of $97 mln from these sales, which will be recorded in other income (expense) net (OI&E) in TXN's Q4 results. TXN also will recognize a previously reserved tax benefit of $62 mln in Q4 associated with TXN's impairment write-down of Micron common stock in Q4 of 2002. The combined effect of the gain and the tax benefit will be an increase of $125 mln to the co's net income for Q4.
6:06PM Monday After Hours prices levels vs. 4 pm ET: The upbeat mood of the regular session has soured some, with the S&P futures - at 1069 - 1 point below fair value and the Nasdaq 100 futures - at 1444 - 4 points below fair value. A few earnings warnings have weighed heavily on the after hours trade, and led to its negative tone.
After lowering its Q3 (Oct) revenue guidance to $93-95 mln from $107-112 mln on November 4, McDATA (MCDT 9.89 -0.70) beat the revised Reuters Research consensus estimate by $0.03, coming in at $0.02. Revenues rose 17% from year-ago levels and came in - at $94.7 mln - within the switch maker's preannounced range. McDATA's Q4 (Jan) outlook, however, was once again below the market's expectation with the company putting revenues at $108-116 mln and net income at breakeven to $0.01 per share versus the consensus estimates of $117 mln and $0.04, respectively. MCDT has dropped 7% as a result.
Video operator Hollywood Entertainment (HLYW 13.05 -1.04) also issued a negative preannouncement for Q4 (Dec) and full year FY03. Citing same store sales that should be up 7-9% (as compared to at least 11% earlier), management cut its EPS guidance to $0.38-0.40 from $0.47. As a result of the shortfall, Hollywood now sees FY03 EPS at $1.42-1.44 (consensus of $1.53). The company also added that it expects net income per diluted share to increase by approximately 5% during FY04, which was also shy of the Reuters Research estimate. HLYW has given back 7% tonight, and pressured shares of BBI and MOVI.
Applebee's (00C0 39.90 +0.01), though, had good news for investors in the extended session. The casual diner reported a 6.1% rise in November comparable restaurant sales, and reaffirmed its FY03 (Dec) EPS forecast of $1.73-1.75. Following Abblebee's Q3 (Sept) report, Briefing.com recommended investors maintain exposure to the premiere name, and shares have advanced 6% since then.
Manufacturer of filtration systems Donaldson (DCI 59.42 +0.05) also gave a better than expected earnings pronouncement. The company reported EPS of $0.56, a penny above the Street's estimate, on revenues that rose 9% to $328.2 mln. Management noted 'we began the year with improving conditions in many of our businesses and the continuation of those trends reinforces our confidence regarding the full year.'
Tomorrow's earnings calendar is fairly light - with only 3 companies scheduled to report - and the economic calendar is similarly thin. Only November Auto/Truck sales are on tap, and those will be released over the course of the trading day.
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
5:49PM Chartered Semi raises Q4 guidance (CHRT) 9.75 +0.25: Co. raises Q4 (Dec) revenue guidance to $178 mln, previously $171 mln and raising their previous ADS Q4 guidance from a loss of $0.20 to a loss of $0.18, estimate ADS is a loss of $0.19.
3:23PM McDATA Earnings Preview (MCDTA) 10.56 -0.09: McData Corp is scheduled to report Q3 results tonight with the Reuters Research consensus EPS est standing at ($0.01) and revenue consensus at $94.45 mln. Thomas Weisel believes that results will post in-line with co's Nov 4 guidance, when MCDTA reduced their Q3 revenue expectation from $107-112 mln to $93-95 mln. Although firm's industry checks suggest that Nov was robust, firm believes that McData mgmt has little incentive to be aggressive on guidance; firm's best guess at this pt would be for Q4 guidance of $110-$115 mln, slightly below the current consensus of $115.7 mln (note Reuters consensus $117.22 mln)... Briefing.com note: As noted above, the Reuters consensus for Q3 is a loss of $0.01. However, the First Call consensus is for breakeven. It appears that the First Call estimate contains an estimate or two that may not have been updated to reflect the Nov 4 warning, which would seem to be the reason for the consensus EPS discrepancy.
2:36PM Xilinx CEO sells 50,000 shrs (XLNX) 37.27 -0.31: Disclosed in an SEC filing that the C.E.O of Xilinx (XLNX) has sold 50,000 shares at a price of $37.52, exercising option at a strike price of $7.95. According to the filing, the amount of securities beneficially owned following the reported transaction is 67,056. Also disclosed in an SEC filing that a V.P. sold 20,000 shares at a price of $37.76, exercising option at a strike price of $14.22.
1:05PM Semi Equip Color : Following up the 12:09 comment on relative weakness in the Semiconductor Equipment space, we are not coming across anything major being cited for the decline. After speaking with analysts, we're hearing that weakness is possibly related to sector rotation out of names such as Applied Materials (AMAT 24.11 -0.13) and Novellus (NVLS 43.31 -0.45) as investors become a little more testy about long-term ownership of tech at these levels.
11:06AM SNDK Color 79.40 -1.42: After checking around, talk on SanDisk (SNDK) is that general market expectation was for a very strong digital camera showing at the start of the holiday season, and now that this has been confirmed, investors are simply selling-the-news. A similar sell-the-news reaction is being observed in consumer electronics names BBY (1.8%) and CC (-3.4%).
9:35AM ThinkEquity on October SIA data : ThinkEquity suggests the S.I.A. figures for September continue to show good unit shipment momentum, with a slight improvement (but not a reversal) in pricing. The firm notes on a moving 3-month average basis, October sales continued a very bullish pace being up 6.8% sequentially (the strongest month since March of 2002) and up 23.3% Y/Y (matching last December's Y/Y growth level). However, ThinkEquity notes year/year growth should decelerate beginning in November until April, briefly rebound, before drifting back toward 10-13% long-term growth. The firm notes observations of a clear shift in pricing leverage into the hands of OEMs and lower consumer price points, suggesting its belief that the second half of this recovery will favor companies with strong mixed-signal portfolios and/or strong integration skills such as TXN, AGR.A and MND over pure digital capacity plays. On the equipment side, the firm notes it would avoid pure-play capacity plays in favor of technology plays (AFCO, RTEC).
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