Semiconductor Equipment . . . Needham downgrades Applied Materials, Novellus, and KLA Tencor to Hold from Buy. The firm is saying checks indicate that industry fundamentals may soften further, resulting in potentially flat to down orders for calendar 2nd quarter and 3rd quarter. The firm also downgrades Cymer to Buy from Strong Buy following last night's announcement of lower than expected orders and margins.
Semiconductors . . . ATI Tech announced several leading notebook manufacturers have chosen to include its MOBILITY RADEON family as its graphics processors, which include the Intel Centrino technology. The notebook manufacturers include Dell, Hewlett Packard, IBM, NEC, Sony, Gateway, and Acer.
Adams Harkness Hill upgraded Micro Semi to Buy from Market Perform on view that company is experiencing strength in its military and medical components segments, which have improved materially over the past few months or so. Firm raises price target to $12.
Analysts addressed five key issues related to Marvell Technology in this report and reiterated their Buy rating on the stock. At $18, MRVL stock is trading at 22x 2003 EPS estimate and 16x our 2004 EPS estimate. These are attractive multiples for a stock whose EPS is expected to increase by 75% in 2003, and by 38% in 2004. Excellent Visibility into Revenue Growth: We believe that Marvell has the best visibility into its revenue and earnings stream for 2003 out of all the companies in our comm-IC /PLD universe of coverage due to its stable storage customer base and the ramp of its products into Western Digital. INTC/GigE - What's the Risk? While Intel is a 20% customer and could replace Marvell with an internal design in 2003, we note that our model already reflects this risk. Analysts are assuming Marvell's GigE market share to drop from 100% to 55% by the end of 2003, and to 30% by the end of 2004. New product cycle in communications: The company's new Prestera line of gigabit switching products is beginning to ramp. Marvell and Broadcom are the only major players in the enterprise switching IC market, which we estimate has a TAM of over $2 billion per year. WLAN - No Market? Although MRVL offers complete 802.11b/g solution, we note that our model assumes MRVL to gain only minimal share in the highly competitive WLAN market. Believe estimates are conservative.
Boxmakers . . . Merrill Lynch is out with a research note saying Hewlett-Packard disclosed an overstatement of its cash flow in a form 10-Q filed with the Securities and Exchange Commission. The firm said the Dow component overstated cash flow from operations for the first quarter by $144 million, lowering the figure to $647 million from $791 million. The company attributed the discrepancy to an error caused by misallocation of proceeds from an investment disposition. Merrill told clients that: "While we believe it was an honest mistake, the timing is bad given investor jitters over segment accounting changes disclosed in the previous release that are now amended in the 10-Q for a second time with the creation of a sixth segment." The firm rates H-P shares a "buy" with a price target of $22.
The Wall Street Journal has a "Heard on the Street" article on Gateway and its drop in stock price to its current levels. The article emphasizes the significance of the co trading at two thirds its cash on the balance sheet totaling $1.07 billion. Gateway's stance is described as optimistic given its recent memo sent to employees, which sees "better days ahead". While some money managers interviewed believe the co will continue to face an uphill battle for growth given its competitors, the article also highlights investors seeing a "turnaround" ahead. Money managers believe its current restructuring plan and robust cash on the balance sheet gives the company "breathing room" and the possibility of more upside.
Hewlett-Packard is out with a press release in response to what it called "market confusion" about the form 10-Q, acknowledging the error but saying its gross cash position of $13.2 billion is "strong and unchanged." H-P also said that, one month into its second quarter, revenue for the combined company is up 3 percent on a year-over-year basis.
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