8:41AM KLA-Tencor downgraded at Wells Fargo on valuation (KLAC) 60.27: Wells Fargo downgrades to MKT PERFORM from Strong Buy based on valuation; although the semi equipment industry now appears to be at the outset of a cyclical upturn, firm believes that KLAC's shares appear fully valued for the coming 12-month period. Price target is $57.
8:36AM Micron Tech: UBS raises ests, price target after DRAM prices rise (MU) 36.95: UBS Warburg raises their DRAM price assumptions for MU following news out of Korea that both Samsung and Hynix have successfully increased their 128Mb DRAM contract prices to $4.50 from $4.00; firm believes that DRAM demand will exceed supply during 2H02, which will likely keep an upward bias on DRAM prices or at worst lead to price stability. Raises 2002-03 ests and ups price target to $55 from $47.
8:32AM Housing Starts rose 6.3% to 1.678 mln, strong number could be good for homebuilders : Housing Starts rose 6.3% to 1.678 mln in January, much stronger than the 1.595 mln consensus. Building Permits rose 3.1% to 1.706 mln, also well above the 1.60 mln consensus. These numbers once again confirm the resilience of the housing sector, and could provide a lift for homebuilder stocks such as KBH, MDC, CTX, PHM, and BZH.
8:23AM Sun Microsystems cut by SoundView; cites data center survey (SUNW) 8.90: Hearing from sources that SoundView downgraded SUNW to HOLD from Buy; cites results of Gartner/SoundView data center survey which showed continuing tight budgets and SUNW in 5th position among enterprise vendors in spending positions and 5th in customer satisfaction; looks for entry points in $7.50-8 range. SoundView says that IBM, DELL, and MSFT had the most positive results in its survey, BEAS and VRTS looked solid, while SUNW, EMC, and CA remained weak, and the outlook for ORCL deteriorated.
8:17AM CIENA/ONI Systems acquisition: analyst comments (CIEN) 8.73: -- Update -- The CIEN acquisition is getting generally favorable comments from analysts. DB Alex. Brown says that the transaction will create an optical powerhouse, with leading mkt share across the board, strong customer base, and $1.3 bln in cash. UBS Warburg says the deal makes strategic sense, although cost/revenue synergies and the integration process will be crucial to the success of the merger. CIBC notes that the acquisition could set off a domino effect of big merger-of-equals in optical networking and could boost shares of CORV, SCMR, and TELM.
7:55AM Broadcom upped at UBS; dissipating competitive pressure (BRCM) 35.03: UBS Warburg upgrades to BUY from Hold after checks suggest a particularly attractive 2002 landscape for revenue ramp and/or design wins and dissipating competitive pressure on the cable modem front. Firm raising FY02 est to ($0.15) from ($0.20) and FY03 to $0.25 from $0.20. Price target goes from $45 to $50, or 50x firm's $1.00 est of co's normalized EPS power in 2003.
7:50AM QUALCOMM wins summary judgment in GTE patent case (QCOM) 37.40: Announces that a U.S. District Court granted co's motion for a judgment that its products do not infringe GTE's '728 patent covering the way in which cellular telephones determine which cellular system to use for a particular call when multiple systems are detectable by the phone.
7:46AM Microsoft, Intel to challenge Nokia in mobile mkt: WSJ : The Wall Street Journal reports that MSFT and INTC announced that they are working together to design a "template" for a high-end phone that they will license to mobile-phone makers, with the aim of extending the "Wintel" duopoly from PCs to mobile phones. According to one analyst, this strategy sets up MSFT to compete head to head with NOK for the future of the cell phone industry, which could potentially commoditize the industry.
7:42AM IBM to provide greater accounting disclosure -- WSJ (IBM) 102.89: Wall Street Journal reports that, in response to investor demands for greater accounting disclosure, IBM plans to start releasing details of financial income that it previously buried in accounting statements as offsets to expenses.
7:38AM Opening Indications : This morning's fair value figures -- S&P 500 fair value: 1105, closed at fair value. Nasdaq 100 fair value: 1438, closed 2 pts above fair value. Current indications: S&P 500 futures are -7.20, or 7.2 pts below fair value. Nasdaq 100 is -19.0 or 17 pts below fair value... IBM continues to weaken amid accounting/disclosure concerns. Cisco weighed down by NY Post article and CIEN/ONIS merger.
7:33AM Cisco ties to Sequoia highlighted in NY Post (CSCO) 17.09: NY Post article comparing Cisco's relationship with Sequoia Capital to Enron's off-the-books partnerships is getting some play on trading floors this morning. Article discusses an apparent conflict of interest by Donald Valentine, a player at Sequoia Capital who was also vice chairman of Cisco's board. According to the NY Post, between 1997 and 2000, Cisco's executives put together more than 60 major mergers and acquisitions, many of which appear to have been funneled through various partnership funds set up by Sequoia. Article also reports that CEO John Chambers was an investor in one of the Sequoia partnerships that held stakes in companies eventually acquired by Cisco. Story claims that upon questioning Cisco officials now assert that Chambers held a position in a Sequoia partnership that differs from the one Cisco disclosed in SEC filings, and that the number of shares held by Chambers also differed from what company disclosed in the filings.
6:46AM ONI Systems to be acquired by CIEN (ONIS) 5.54: ONIS agrees to be acquired by Ciena (CIEN 8.73) in an all-stock deal; shareholders receive 0.7104 shares of CIEN for each ONIS share, or $6.20 per share based on Friday's closing prices. Ciena emphasizes potential cost savings of $55-65 mln annually. Deal brings together leaders in long-haul and metropolitan DWDM, which is a nice fit, but both companies have been battered by the collapse of the telecom services sector, making this deal appear to be a move made more out of desperation than opportunity.
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