From a MAJOR Firm's call this morning:
Enterprise HW Fund`tals Getting Worse Before They Get Better; Cutting Ests Again
We are once again making sizable cuts to revenue and earnings forecasts for the enterprise server and storage companies, including BRCD, EMC, HWP, IBM, NTAP and SUNW, based on continued slowing in the U.S. and our belief that this will spread to Asia and Europe. We have gone to the low end of the range of expectations or below it in some instances, and are well below consensus forecasts. In the U.S. the slowing has spread to virtually all industries, while anecdotal evidence is beginning to suggest that the slowing is also spreading to parts of Asia and Europe. Compounding the demand problems are overcapacity in the telco space, intermittent inventory buildups, and aggressive pricing action.
While the risk-reward potential for our universe of stocks is beginning to look more attractive, we maintain our view that it is too early to err in favor of the upside. We think that there is the potential for an additional 10-30% downside to our stocks versus upside of 50-100% over a 12-18 month time period, with the stocks likely to trend down more before recovering given the negative fundamentals and the downward bias to earnings.
Michael |
