From Briefing.com: 7:57AM Western Digital stock price might be too lofty -- Barron's (WDC) 12.62: Barron's Online article highlights hard disk drive company Western Digital and its recent runup in stock price. The co has been able to purge some of its debt, expand operating margins, and garner market share from competitors such as MXO. Despite business appearing to be stabilizing, a Fulcrum analyst interviewed in the article believes the disk drive market remains a "zero sum, loser's game". In addition, the analyst cites concerns over competition, potential price wars and end demand. Also, a Hoefer & Arnett analyst points to heavy insider selling given the stock's price runup as "somewhat of a concern". Given the co's execution in paying off its debt and balance sheet flush with $350 mln in cash, WDC is positioned to benefit from any recovery in PC demand. However, the onslaught of this recovery has yet to come to fruition with the article suggesting investors take a cue from co. execs and make "a graceful exit from these shares".
7:45AM Seagate Tech unlock could trigger some selling pressure -- Goldman Sachs (STX) 15.54: Goldman Sachs believes that given recent run in the stock, co's June 9 lock-up could trigger some selling pressure. Firm also notes that the size of this lock-up is significantly larger than the one in March. The June lock-up covers 28 mln employee shares vs 11.1 mln employee shares in March, when the stock was trading significantly lower. Goldman says would be buyers below $13.
7:28AM Brocade upgraded at Merrill Lynch (BRCD) 6.04: Merrill Lynch upgrades to Buy from Neutral based on: 1) improving competitive position against MCDT and CSCO, 2) resolution of OEM inventory issues, 3) continued strong demand and stable pricing for SANs, and 4) attractive valuation relative to its past and MCDT; raises FY03-04 ests above consensus; target is $7.75.
7:24AM Altera, Xilinx cut to Neutral at Soundview : Soundview downgrades ALTR and XLNX to Neutral from Outperform, citing data points that indicate slightly weaker than expected trends at US distributors and a slowdown in May bookings, as well as summer seasonality; also, recent stock runs have made ALTR and XLNX valuations lofty, as the stocks are now trading at 40x and 34x their CY04 EPS ests, respectively, or 40-80% above their 5-year median one-year forward P/E's.
7:18AM Early Research Calls : SoundView downgrading XLNX and ALTR to Neutral from Outperform after strong run in price... Morgan Stanley cutting private mortgage names MTG and PMI... UBS Warburg downgrading IRGI and OPTN from Buy to Neutral on valuation, while initiating BEAS and ORCL with Neutral ratings.. UBS also cutting oilfield names BHI and CAM to Neutral... SG Cowen cautious on PAYX, lowering F04 EPS est below consensus... ACF cut to Mkt Perform at Wachovia.
7:07AM IBM discloses SEC investigation (IBM) 87.33: Issue fell 2.40 pts in extended hours trading after co disclosed that the SEC is seeking information relating to revenue recognition in 2000 and 2001 primarily concerning certain types of customer transactions. In a note on IBM, Goldman Sachs says that while on the surface the investigation seems very narrow, touching on perhaps 1% of IBM's revs, there is no way to gauge whether it will broaden. Still the analyst believes investors will give IBM the benefit of the doubt given its increasing transparency and its relatively strong fundamentals. If anything, they can see IBM's rel. mkt multiple dropping down temporarily from 1.1x the S&P multiple to 1.0x, which could take the stock down by another couple of pts.
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