[Briefing.com] Tech Stock Analysis Updated: 22-Mar-01 General Commentary
They came, they saw, they sold... With few exceptions, it's been the same story for months... There is a new wrinkle, however... Whereas it was the tech-heavy Nasdaq which used to bring down the blue-chip indices, for the past couple weeks it has been the blue-chip indices undercutting the Nasdaq... Yesterday was a perfect example... Techs tried to press higher for much of the day only to capitulate when the DJIA collapsed in the afternoon... As long as the DJIA and S&P remain in death spirals it will be tough for the Nasdaq to hold its ground, yet alone sustain an advance.
Stocks taking the biggest beatings were the ones priced under $10... Infospace (INSP 2 7/32 -15/32), Metromedia Fiber (MFNX 5 3/32 - 1 3/32), XO Communications (XOXO 6 17/32 -1 15/32), 360 Networks (TSIX 3 7/32 -17/32), Exodus (EXDS 9 27/32 -29/32), Wireless Facilities (WFII 6 1/8 -1 1/2), Copper Mountain (CMTN 2.51 -0.30), WebTrends (WEBT 9 15/16 -7/8) and PurchasePro (PPRO 6 -1 17/32) come quickly to mind... Institutional investors want nothing to do with them and shorts smell blood - a lethal combination... As long as macro-economic conditions remain soft, investors will continue to avoid stocks with limited earnings history/visibility... Consequently, if you're thinking of bargain hunting in tech - avoid shopping the bargain basement stocks.
Nasdaq is fast approaching pivotal support at 1780... Would expect the index to stage a meaningful rally try off this floor... Failure to do so would be very depressing.
Robert Walberg
Industry Briefs
Computer Systems & Peripherals | Networking | Internet | Semiconductor | Semi Equipment | Software | Telecom Equip | Telecom Services
Computer Systems & Peripherals
Industry Members
Compaq (CPQ) 18.15 +0.40: Company and Inktomi (INKT) announce that they have signed a formal agreement by which Compaq becomes Inktomi's Premier Design Partner for the development of integrated content networking platforms; companies team to deliver Internet solutions that accelerate rich content distribution across customer networks.
Dell Computer (DELL) 24 11/16 +1/4: Company and and Samsung Electronics enter strategic technology and research-and-development agreement worth an estimated $16 bln; under the deal, Samsung will provide memory components, liquid-crystal displays, monitors and optical disk drives to Dell for use its line of computer system products.
Hewlett-Packard (HWP) 29.23 -0.08: Wall Street Journal Online reported that the company indicated that revenue growth slowed to 2% in Q1 and probably won't improve for the rest of the year. CEO Carly Fiorina made comments at a press conference ahead of CeBIT and stated that they are not assuming any improvements in the current fiscal year, noting that "it's like navigating in a fog."
Sun Microsystems (SUNW) 18 3/8 +1: Unveils the much-anticipated UltraSPARC III technology-based Sun Fire servers... The WSJ reported that mass production was delayed due to process glitches at manufacturer Texas Instruments... In CNBC interview, CEO Scott McNealy reiterated that company/sector has no visibility... With respect to reports that company shipping chips back to Texas Instruments, McNealy says not aware of such a situation.
Networking
Industry Members
3Com Corp (COMS) 5 31/32 -1/4: Reported a Q3 loss of $0.36 a share, $0.01 worse than the First Call consensus of ($0.35), vs year-ago earnings of $0.22; revenues fell 17.9% to $629.60 mln from a year-ago of $766.70 mln; company attributes decline of revenues to reduced demand across most of its product segments, stemming largely from weaker industry conditions in the US.
Cisco Systems (CSCO) 19 1/4 +3/16: UBS Warburg continues to be cautious on CSCO. Channel checks performed by firm indicate that business is off 20%-30% and that a possible pre-announcement could occur sometime in early April... Looking out to July, believes business could also be flat or down on a sequential basis.
Proxim (PROX) 9 -5 7/8: H.C. Wainwright & Co. sees drop in Proxim's share price as an overreaction to news that Intel (INTC) plans to introduce new product line based on 802.11b wireless standard; firm believes that this decision by Intel allows Proxim to become more aggressive with HomeRF retail products.
Internet
Industry Members
Agile Software (AGIL) 13 9/16 -5/16: DB Alex. Brown believes the likelihood of the Ariba (ARBA 10 3/16 -1/8)/Agile merger closing has decreased substantially, as stocks have fallen 74% and 68%, respectively, since deal was announced... Does not expect companies to terminate the deal ahead of voting, but believes shareholders could potentially vote against the merger if Agile shares fall further from current levels due to a breakdown in Ariba's fundamental outlook..
DoubleClick (DCLK) 10 7/16 -1/2: Announces fundamental changes to the way the company is approaching its media business; move includes a 10% reduction in its global workforce.
PurchasePro.com (PPRO) 6 -1 17/32: Prudential downgrading to HOLD from ACCUMULATE based on channel checks with Netscape Netbusiness preferred service providers and deteriorating economic environment. Lowers price target to $10 from $25.
Ticketmaster (TMCS) 8 1/4 +7/16: Agressive buying by a few interested parties on news company has entered a strategic alliance with AOL. Deal calls for Ticketmaster's event ticketing services to be distributed to users of all America Online brands through a new "AOL Box Office By Ticketmaster."
Wit SoundView on Online Ads : Firm cuts online advertising forecast to $7.2 bln vs prior estimate of $8.4 bln. New estimate calls for a 10-15% decline in online ads. Believes AOL will gain a significant share of online spending as competitors weaken. Also says YHOO's share of the ad market will decline from approximately 14% to just over 11%. Continue to be very cautious regarding names exposed to the online advertising industry.
Yahoo! (YHOO) 13 11/16 -1/4: ABN AMRO reiterates REDUCE rating; believes lower deferred revenue, slower migration of traditional advertisers, and lower interest rates will compound Yahoo's struggles for at least the next few quarters. Yahoo is still no bargain. Net2Phone (NTOP) renegotiated its agreement with Yahoo, and will now receive payments from Yahoo for IP-based telephony services. Previously, Yahoo had received payments from Net2Phone -- could be a trend.
Semiconductor
Industry Members
Analog Devices (ADI) 37.30 -1.15: Company announces the creation of the VersaCOMM product family of re-configurable digital converters that perform digital filtering and frequency conversion for high-speed signal processing applications.
Dallas Semi (DS) 28.01 +0.51: After the close, company warned for Q1; sees revenues of $90.7 mln; current estimate is $126.43 mln; current EPS estimate is $0.34. Company says current market conditions continue to result in low turns orders, order cancellations, and rescheduling... News sending stock of Maxim (MXIM), which plans to acquire DS, down nearly two points.
Micron Tech (MU) 42.01 +1.41: After the close, company announces that net sales for its Semiconductor Operations were $1,051 mln for Q2. Company's consolidated results of operations will not be released until next week... In conference call, company noted that excess inventory position at PC OEMs has corrected itself, but that customers are ordering DRAM now at a level that is commensurate with current demand... Stock up more than one point in after hours trading.
TranSwitch (TXCC) 16 13/16 +5/16: Frost Securities initiates coverage with a BUY rating and price target of $38. Sees the supplier of innovative high-speed VLSI semiconductor solutions as well positioned to weather economic slow-down, much better than many of its peers in the communications industry, as nearly half of its revenue comes from Europe and Asia.
Semi Equipment
Industry Members
Applied Materials (AMAT) 44 7/8 +2 1/16: Company's CFO has "very low expectations" for a near-term recovery in the sector, reported Reuters. Speaking at the SEMIvest conference in New York, CFO Joseph Bronson stated that there aren't any positive signs that he can see.
Novellus (NVLS) 41 1/8 +13/16: Morgan Stanley Dean Witter initiates coverage with an OUTPERFORM rating and $50 price target. Novellus is gaining share in the general CVD market, and the Gasonics acquisition should compliment the company's low-K CVD strategy. Novellus is the market share leader in copper deposition (ECD) and is beginning to make inroads in PVD.
Software
Industry Members
Citrix Systems (CTXS) 17 11/16 -2 1/8: Reaffirms financial guidance provided in January. Expects Sequoia Software (SQSW) acquisition to dilutive to earnings in fiscal 2001 and accretive in fiscal 2002.
i2 Technologies (ITWO) 15 -1 1/4: Josephthal & Co lowers FY01 to $0.30 from $0.38. Industry sources indicate that i2 has a sufficient backlog to report revenues and profits for Q1 that are consistent with current company guidance. However, says sources also suggest that ITWO will formally lower its fiscal 2001 revenue estimate, perhaps to just under $1.5 bln (20% below internal sales est. at beginning of the yr).
Microsoft (MSFT) 50 1/16 -2 5/8: Banc of America Sec initiates coverage with a MKT PERFORM; firm says current valuation of 30x calendar adjusted 2001 EPS forecast of $1.81 fully discounts near-term opportunities, given the slower revenue and earnings growth outlook... Stock also hit by rumor that Goldman Sachs is preparing a cautious research note on the company that suggests MSFT will fail to meet revenue targets for the qtr. Briefing.com spoke with firm, and it denied this rumor. Firm's rebuttal provided little benefit to the stock.
NetIQ (NTIQ) 20 1/8 -1 7/8: After the close, company warns for Q3; sees EPS of $0.13-0.17; current EPS estimate is $0.21. Revenues will be $37-40 mln (vs estimate of $46.24 mln). Cites the impact of a slowing economy and IT spending... In light of NTIQ's warning, the company and WebTrends (WEBT) have adjourned their special shareholders' meetings to consider their merger until Mar 30 to give shareholders time to consider NTIQ's announcement... NTIQ trading down to 17 7/8 after hours on concerns that merger might be in jeopardy, though both companies still support the merger. WEBT trading off 7/8 to 9.
Oracle Corp (ORCL) 14 3/4 +3/8: CSFB views Oracle job cuts as a modest positive as company adjusts to slower market demand. However, given stock's relatively rich valuation (33x CY01 EPS) and aggressive sequential growth expectations, feels that there is additional downside exposure at current levels... Separately, QUALCOMM Inc (QCOM) signs a large applications deal with Oracle. QCOM to deploy the Oracle e-Business suite worldwide for increased efficiency and customer responsiveness.
Parametric Tech (PMTC) 8 31/32 -15/32: Wit SoundView is out expressing confidence in $0.07 EPS estimate; says some deals that were pushed out last quarter gives confidence in MarQ numbers. BUY rating with a $15 price target.
Siebel Systems (SEBL) 26 15/16 +1 13/16: Company announces that AT&T Wireless (AWE), the third largest wireless carrier in the U.S., will standardize its customer-facing operations on Siebel eBusiness Applications; AWE will use Siebel eBusiness Applications for optimized customer relations and improved service.
Telecom Equip
Industry Members
Avici Systems (AVCI) 14 7/8 -1/2: SG Cowen initiates coverage with a BUY rating and price target of $23; firm says market environment is difficult, with limited visibility and lumpy large orders, but stock is attractive given first-mover advantage, small but growing market share, and base of well financed customers.
Globecomm Systems (GCOM) 10 -11/16: Provider of end-to-end satellite-based communications solutions has been awarded an add-on $1.7 million contract from an independent IT solutions integrator; under terms of the contract, Globecomm Systems will provide a transportable earth station terminal, teleport services, voice over IP services, data services, and operation and maintenance services.
Lucent Tech (LU) 11.40 +0.20: Signs a multi-million dollar contract with BT Ignite to expand and enhance the existing UK mass-market, voice-over-IP service. BT Ignite will deploy the carrier-grade Lucent Softswitch to allow BT Ignite to introduce a variety of IP-based services for the UK mass market.
Motorola (MOT) 14.16 +0.04: Company announces that they have signed an agreement with Notify Technology (NTFY) that would make Notify's wireless desktop e-mail and personal information management (PIM) solutions available under the Motorola brand for Motorola's ReFLEX 2-way messaging customers.
Powerwave Tech (PWAV) 12 15/16 -1 1/4: JP Morgan downgrades to MKT PERFORM from LONG TERM BUY following yesterday's warning for Q1; cites significant decline in single-carrier 2G amplifiers and softness in multi-carrier business; firm says new agreements with Lucent and Motorola are positive, but not enough to offset earnings weakness.
Tellabs (TLAB) 42 7/8 -3/8: Latin America's largest communications services provider, Embratel, selects Tellabs' MartisDXX system to expand its telecommunications network in Brazil.
Telecom Services
Industry Members
AT&T (T) 22.32 -0.03: Telecom Analyst, Jack Grubman sees no constructive fundamental reason to own the stock. Without AT&T Wireless (AWE), the company is about an 81% long distance company, which he estimates will decline about 3% y/y. Business segment likely to decline y/y in Q1 and roughly flat in FY01. He cuts FY01 estimate to $0.25 GAAP (excl. other inc. & goodwill amort.) & $0.80 cash vs $0.30 & $1.00.
New Lows : Heavy selling continues in the CLEC/telecom space, as investors back away from companies with crushing debt loads and high cash burn rates. Shares of WCII, XOXO, MCLD making new lows on a surge in volume.
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