| FYI:Cirrus Logic (CRUS) 18.26 +1.56: CRUS is getting a makeover. This chipmaker reported EPS of $0.06, in line with the First Call consensus on 25% revenue growth yoy. It also guided down for JunQ, expecting a sequential sales decline of 10%-15% with EPS of $0.10-0.15, vs consensus of $0.11. However, the most important announcement was that the company is refocusing itself on its higher growth/higher margin entertainment electronics business and away from its magnetic storage business. Management quantified the impact on the income statement. Assuming a recovery in the chip industry by early next year, mgmt believes it can achieve its new targets by the end of next fiscal year: gross margin of 50%, up from 44%-46% and operating margin of 20%, up from 16%-18%...The conference call last night was positive as gross bookings and book-to-bill increased in MarQ. Strongest showing was for products going into DVD players and set top boxes. Also, a key statement was that the large amount of cancellations described in the company's pre-announcement a month ago have virtually stopped....Balance sheet poised to wether downturn with $3.41/share in cash and investments and virtually no long term debt...This morning, influential Salomon Smith Barney analyst Jon Joseph upgraded the shares to Buy from Outperform and raised his price target to $28 from $25...Despite First Call consensus EPS for fiscal 2002 of only $0.59, Briefing.com views CRUS among the most attractive chip stocks to own for a sector turnaround over the next year. Like many chip stocks, CRUS has doubled since early April, so there should be some weakness over the next couple of weeks. We would buy on dips given the company's transitioning to become a higher growth and higher margin company. Cirrus Logic will be the chip industry's largest pure play in consumer entertainment electronics, with strength in analog and DSP technologies. Our 12 month target is $30. -- Robert J. Reid, Briefing.com |
