From Briefing.com: Lower than expected consumer confidence data from The Conference Board dragged the broader market lower but large cap semiconductor and semiconductor related shares, led by Novellus Systems (NVLS 34.40 -5.85), took it on the chin after NVLS offered revenue growth and margins guidance that fell far short of what the company will need to deliver over the coming quarters in order for investors to justify owning shares at current valuation.
The Dow and the S&P both fell about 1% while the Nasdaq Composite (IXIC 2116.04 -37.79) gave up 1.75%. In contrast, the Philadelphia Semiconductor Index (SOXX 517.42 -22.39) dropped 4.15%, with decliners outnumbering advancers 17:1. The sell off in tech, outside of the SOXX, was less severe. The Briefing.com Tech Index (BTI) fell 1.4%, with decliners outnumbering advancers 1.8:1. Decliners fell 2.8% and advancers rose 2.9%.
Micron Technology (MU 15.71 +0.71) was the only SOXX component to avoid the downdraft, floated by positive comments from two brokerages on DRAM pricing trends. We noted in MU's Q2 preview (Story Stocks, December 22, 2003) that the shares may be significantly undervalued assuming the company achieves operating margin at the mid to high end of our model. Firm DRAM pricing supports the bullish scenario and we would continue to accumulate MU shares despite the almost 23% rise in the share price since December 22. Outside of the SOXX, semiconductor capital equipment manufacturers Agilent Technologies (A 36.10 +2.19) and Brooks Automation (BRKS 26.10 +0.60) also managed to avoid the downdraft after posting stronger than expected results.
The revenue growth and operating margin concerns are not limited to NVLS. Overall, we would swap out of the semiconductor capital equipment group given the high revenue growth and operating margin expectations priced into semiconductor capital equipment stocks. For investors seeking a semiconductor capital equipment play, we would continue to focus on ASM International (ASMI, 25.11 -0.16). ASMI has one of the broadest product portfolios covering both front- and back-end equipment, and is more rationally priced than its peers. However, note that ASMI has risen over 46% since we first mentioned the company on the Tech Stocks page (October 14, 2003).----Ping Yu, Briefing.com
6:28PM Tuesday After Hours prices levels vs. 4 pm ET: The indices have recovered a bit since today's steady slide lower, but have not made meaningful headway forward. The stock market's impressive close at new multi-year highs yesterday continues to serve as a deterrent to buying. Thus, only a few names have staged rallies in tonight's extended session. Better than expected earnings reports, followed by upside earnings guidance, have been the catalysts for several tech shares.
Presently, the S&P futures, at 1143, are flat with fair value, and the Nasdaq 100 futures, at 1522, are 1 point above fair value. The below table highlights some of the night's most notable reporters, and the reasons behind the stock's move:
After Hours Mover % Change Move Reason for Move
Amazon.com (AMZN) -4% Internet retailer meets Q4 (Dec) Reuters Research consensus EPS estimate of $0.29 in its first profitable year and puts Q1 (Mar) revenues above Street expectations; Traders lighten positions in an extension of this quarter's tendency to sell into the report - no matter how good the news was
Broadcom (BRCM) +7% Semiconductor company initially sells off in the after hours after announcing a $750 mln shelf registration following its better than expected Q4 (Dec) report; Quickly reverses course, though, after projecting Q1 (Mar) revenues at ~$527 mln versus the consensus of $467.5 mln on its conference call; Cites strong booking trends for the upside
Electronic Arts (00C0) -5% Interactive software maker tops Street's EPS forecast by $0.06 in Q3 (Dec) report but issues FY04 (Mar) EPS guidance that is noticeably short of the Reuters Research estimate; Like other video game makers, Electronic Arts continues to suffer from lower profit margins on products
Emulex (ELX) +2% Storage company surpasses Q2 (Dec) consensus estimates and sees Q3 (Mar) EPS and revenues above the market's expectation; In Briefing.com's Earnings Preview on In-Play, we suggested that the company could turn in above consensus results; Competitors include A, ADPT, HPQ, INTC, and QLGC
Flextronics (FLEX) +7% Electronic manufacturing service name beats Reuters Research numbers in Q3 (Dec) report and also sees the top and bottom-line much stronger than expected in Q1 (Mar) outlook; Tone of conference call was bullish and was in synch with the recent strength seen in rival CLS's recent report
Tomorrow, the market has a diverse group of earnings reports on tap, with names ranging from Anadigics (ANAD) to Procter & Gamble (PG). Economic reports are also fairly varied as December Durable Orders and New Home Sales are on the calendar.
The main thing, however, on investors' minds will be the Fed's policy statment at 14:15 ET tomorrow, which comes at the conclusion of its two-day meeting. There is unanimous belief that the fed funds rate will remain unchanged at 1.00%, and thus the focus will be on the policy statement. For more insight into what to expect, be sure to visit Briefing.com's Looking Ahead column.
For more detail on these, and other developments, be sure to visit our Stock Market Update and Daily Sector Wrap. -- Heather Smith, Briefing.com
5:12PM MTS Systems announces 2.5 mln share buyback (MTSC) 24.50 +0.24: Co announces that its Board of Directors has authorized it to repurchase 2.5 mln shares of its common stock, in addition to approx 610,000 shares remaining under an existing authorization. The new authorization is equal to about 12% of MTSC's shares outstanding.
5:08PM BRCM trades up 2.90 pts in after hours, a 4.50 pt reversal off after hours lows :
5:03PM Broadcom guides Q1 revenues well above consensus (BRCM) 40.60 -0.75: -- Update -- On call, BRCM says it has not experienced any seasonal softness in the Q1 (Mar) period, and now expects a 10% sequential increase in revenues... This puts revs at ~$527.01 mln versus the Reuters Research consensus estimate of $467.5 mln... Management also says that bookings have been strong, and gross margins should be around Q4's (Dec) level.
5:07PM Adv Fibre Comm beats by $0.01 (AFCI) 24.70 +0.30: -- Revision -- Earlier we had reported that AFCI had reported earnings of $0.06 per share. This was their GAAP EPS number and included one time special items that amounted to a $0.04 charge. After backing out these charge the company reported earnings of $0.10 per share, $0.01 better than Reuters consensus of $0.09.
4:12PM Pixelworks beats by $0.02, ex items; guides in line for Q1 (PXLW) 14.99 -0.39: Reports Q4 (Dec) earnings of $0.11 per share, $0.02 better than the Reuters Research consensus of $0.09; revenues rose 40.2% year/year to $40.8 mln vs the $38.8 mln consensus. Co sees Q1 EPS of $0.08-0.09 and revenue in the range of $41-43 mln, Reuters consensus is $0.08 and $42 mln, respectively
4:12PM Flextronics beats by $0.03, ex items, raises Q4 guidance above consensus (FLEX) 17.81 +0.04: Reports Q3 (Dec) pro forma earnings of $0.17 per share, excluding intangibles amortization, restructuring and other charges, $0.03 better than the Reuters Research consensus of $0.14; revenues rose 7.8% year/year to $4.15 bln vs the $3.84 bln consensus. Co also raises Q4 guidance, now sees pro forma EPS of $0.09-0.11, vs the R.R. consensus of $0.08, and revenues of $3.4-3.6 bln, vs an estimate of $3.2 bln.
4:11PM Cymer beats, guides in line (CYMI) 42.77 -3.48: Reports Q4 (Dec) earnings of $0.04 per share, $0.04 better than the Reuters Research consensus of $0.00; revenues rose 4.3% year/year to $73.0 mln vs the $70.9 mln consensus. Company sees Q1 total product revenues increasing 5-10% sequentially, equates to $76.65-80.3 mln, consensus $77 mln
4:08PM Broadcom files $750 mln shelf registration (BRCM) 40.60 -0.75: -- Update --
4:08PM Broadcom beats by $0.03, ex items (BRCM) 40.60 -0.75: Reports Q4 (Dec) pro forma earnings of $0.19 per share, excluding charges, gains and effects included in GAAP reporting, $0.03 better than the Reuters Research consensus of $0.16; revenues rose 61.9% year/year to $479.1 mln vs the $463.0 mln consensus.
4:06PM Emulex beats, guides higher (ELX) 29.18 +0.42: Reports Q2 (Dec) non-GAAP earnings of $0.24 per share, $0.01 better than the Reuters Research consensus of $0.23; revenues rose 23.4% year/year to $94.4 mln vs the $91.7 mln consensus. Company sees EPS of $0.25 vs consensus of $0.24 on revs of $100-102 mln, consensus $97.15 mln
4:06PM ERTS prelim $1.26, 6 cents ahead; revs $1.475 bln vs $1.476 bln consensus :
4:06PM PXLW prelim $0.11, ex items, Reuters consensus is $0.08 :
4:06PM Pericom Semi beats by $0.02, pro forma; guides Q3 revs above consensus (PSEM) 12.50 +0.45: Reports Q2 (Dec) loss of $0.02 per share, pro forma, $0.02 better than the Reuters Research consensus of ($0.04); revenues rose 51.4% year/year to $16.9 mln vs the $16.3 mln consensus. Company sees Q3 revs of $18.0-18.5 mln vs the R.R. consensus of $17.75 mln.
4:04PM MEMC Elec beats by $0.02 (WFR) 11.04 +0.19: Reports Q4 (Dec) earnings of $0.15 per share, $0.02 better than the Reuters Research consensus of $0.13; revenues rose 4.8% year/year to $205.3 mln vs the $204.8 mln consensus.
4:03PM Coherent beats by $0.13 (COHR) 25.61 +0.90: Reports Q1 (Dec) loss of $0.01 per share, $0.13 better than the Reuters Research consensus of ($0.14); revenues rose 5.8% year/year to $108 mln vs the $104.7 mln consensus.
3:29PM 50 Day-Alert -- NVIDIA (NVDA) 22.54 -1.46: -- Update -- -- Technical -- Stock extends breakdown in recent action but has thus far held near support at its 50 day exp at 22.37 (session low 22.45). If follow through develops, an important secondary support is in the 22.20/22.12 area. This marks the Nov/Dec highs as well as its 50 day simple mov avg.
3:20PM Flextronics Earnings Preview (FLEX) 17.18 -0.59: Flextronics reports its Q3 after the close with Reuters Research earnings expectations of $0.14 per share and revs of $3.84 bln. Deutsche Bank believes better than expected handset demand should drive sales towards the high-end of guidance ($3.6-$3.9bln), while aggressive pricing pressure should limit Flextronics profit contribution in the quarter (despite improving printed circuit board fabrication fundamentals and restructuring). The firm notes handsets is the key driver to the F3Q sales increase. Deutsche believes newsflow and anecdotes from several handset original equipment manufacturers and component suppliers suggest handset production in the December quarter has been robust. The firm's recent checks suggests that inventory levels throughout the channel remain relatively clean.
3:14PM BRCM: CNBC guest says seeing bullish options trading in stock going into earnings tonight 41.21 -0.15:
3:10PM Emulex Earnings Preview (ELX) 29.51 -0.44: Emulex reports its Q2 after the close with Reuters Research earnings consensus of $0.23 per share and revs of $91.7 mln. American Technology Research is forecasting above consensus results with strength in its core host bus adaptor business and a pick-up in FICON and embedded switches. The firm is forecasting revenue to grow 11% Q/Q to $93.5 mln and EPS of $0.23. Am Tech believes the co's core businesses of host bus adaptors is benefiting from stronger activity at EMC, H-P, Hitachi Data Systems, and Dell. In addition, Am Tech sees FICON and embedded switches becoming bigger contributors of revenue with stronger activity in FICON with IBM's zseries mainframes and ramping embedded switch sales from its Vixel acquisition (the firm is forecasting $4 mln vs consensus view of $3.5 mln).
2:53PM New NASD Short-Selling Rule Coming Feb 20 : An upcoming NASD rule change takes effect on February 20 that makes shorting stock harder for bigger players and more similar to the rules for individuals. The loophole that closes is a broker/dealer placing a short sale with another broker/dealer does not have to have the borrowed shares identified in advance. Now they will, just like trades for individuals must. For more, see today's Ahead of the Curve column... briefing.com
2:32PM Broadcom Earnings Preview (BRCM) 41.30 -0.05: Broadcom reports its Q4 after the close with Reuters Research earnings expectations of $0.16 per share and revs of $463.0 mln. CIBC raised its estimates and reiterated its sector outperform rating ahead of earnings on increased optimism for Q1. Though consensus estimates are for flat revenues in Q104, the firm believes BRCM could buck seasonal trends and post growth of 5% or more. CIBC believes digital broadcast satellite customer DISH is coming on strong with the firm's checks indicating that sales to CSCO are ramping as that company prepares for a further recovery in IT spending. The firm believes there also may be some slight upside to guidance of 7%-9% sequential growth. CIBC is modeling revenue of $460 mln (up 8% sequentially and 55% year/year), gross margin of 50%, operating margin of 13.6% and EPS of $0.16.
2:09PM ISIL estimates trimmed at SoundView 26.44 -0.79: Firm revising estimates to reflect what it believes to be a weaker than expected pricing environment for Intersil's (ISIL) desktop power management business; believes near-term issues on desktop power management are likely to cause some investor concern, but thinks this has limited impact to longer-term outlook. Lowers price tgt to $33 from $35 to reflect slight reduction in estimates.
12:50PM AGR.A tgt raised to $5.10 from $4.20 at Roth Capital 3.78 +0.30: Roth raises its Agere Systems (AGR.A) price tgt to $5.10 from $4.20 following this morning's earnings report. Firm believes the worst is behind the co, as its sales grew for the fourth consecutive quarter. While the Client business has been carrying co in the last couple of years, it appears that the Infrastructure business is finally bottoming out. In addition, its financial data, especially its balance sheet, continues to improve. As a result, Roth believes co is poised to capitalize on the economic recovery that is currently under way.
ATI Technologies (ATYT) 17.11 -0.02 : Goldman Sachs reiterated its Outperform rating on ATI Technologies following graphics market share data for Q4 from Mercury Research out last night. The data confirms positive ATYT desktop PC market data points as well as what the firm believes is risk to NVDA revenue ests. Surprising in the data was the indication ATYT held steady in standalone notebook, where the firm had expected NVDA to recover some share. The firm thinks there is additional downside risk to NVDA ests for FQ1 (Apr) and FQ2 (Jul) given the unexpected gap in share gains in notebooks.
Micron (MU) 15.71 +0.71 : UBS upped stock to Buy from Neutral and raised tgt to $18 from $15 on view that DRAM pricing will likely bottom out in Q1 and then rise slowly through the year; low pricing, potential improvements in DRAM per PC, favorable inventories, and a slight DRAM shortage in 2H04 should support higher DRAM ASPs in 2H04; firm is looking for DRAM stock prices, including Micron's, to rise over next 3 months in anticipation. Smith Barney upgraded Micron to Buy from Hold and increased tgt to $21 from $15. According to firm, DRAM pricing is holding up reasonably well yr-to-date, and DRAM makers' apparent interest in everything but DRAM could keep supply in check over the next several months; firm also notes that Micron has significantly underperformed most chip stocks over the last 6-12 months.
Pericom Semi (PSEM) 12.50 +0.45 : After the close, reported Q2 (Dec) loss of $0.02 per share, pro forma, $0.02 better than the Reuters Research consensus of ($0.04); revenues rose 51.4% year/year to $16.9 mln vs the $16.3 mln consensus. Company sees Q3 revs of $18.0-18.5 mln vs the R.R. consensus of $17.75 mln.
Silicon Labs (SLAB) 51.57 +7.57 : Co said in today's 10-K that Digcom commenced a lawsuit on Jan 14, 2004 against it and several other major co's in the GSM/GPRS wireless mkt for alleged past infringement of one of their expired patents. Co says Digcom's complaint asserts that SLAB and the other major co's have infringed their '602 patent by manufacturing, using, and selling products and equipment for operation in GSM/GPRS wireless networks, including SLAB's Aero/Aero+ GSM Transceiver Chipsets as a whole and the Si4200 and Si4201 Chips individually. Co does not believe that an injunction can be sought since the alleged patent has expired, and does not expect any impact on the sale of their products as a result of this lawsuit.
Brooks Automation (BRKS) 26.10 +0.60 : Before the open, reported Q1 (Dec) loss of $0.18 per share, pro forma, $0.02 better than the Reuters Research consensus of ($0.20); revenues fell 2.4% year/year to $82.5 mln vs the $82.4 mln consensus. Company sees Q2 GAAP EPS of $0.01-0.05 and Pro Forma EPS of $0.10-0.15 vs the Reuters Research consensus of $0.01.
ON Semiconductor (ONNN) 7.48 -0.42 : Raised Q4 (Dec) revenue guidance from sequential growth of 2-3%, now expects revenue growth of approximately 5%. Company reaffirmed gross margin guidance of approx 28%. Co announced a common stock offering of 47 mln shares, including 34 mln shares offered by the co and 13 mln shares offered by a selling stockholder. These securities will be issued under the co's existing shelf registration, and includes an additional 7.05 mln shares to cover overallotments.
Novellus Systems (NVLS) 34.40 -5.85 : Goldman Sachs commented on Novellus' earnings report. Operating EPS of $0.07 was in-line with the firm's estimate which revs were slightly below. Q4 orders of $283 mln were above the firm's estimate of $275 mln but disappointing relative to upside shown last week by peers. Q1 orders were guided up to $305 -$315 mln, below the firm's est.of $330mln. As such, the firm lowers its CY04 EPS est.to $1.00 from $1.20 on lower orders and margins. The firm believes the stock will come under severe pressure today due to weak orders and margins. No change to the firm's view that the group stock cycle is nearing an end as the industry reaches normalized levels of cash flow.
PDF Solutions (PDFS) 14.61 -0.94 : Co expects Q1 pro forma EPS of ($0.01)-$0.01 on $12.5-$13.0 mln in sales, vs consensus of $0.02 and $14.0 mln. Co also expects Q2 EPS of $0.03-$0.05 on $14.4-$15.2 mln, vs consensus of $0.04 and $15.5 mln.
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