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Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: Clint E. who wrote (22102)	7/16/1999 7:15:00 PM
From: Clint E.	Respond to of 69972

Friday July 16, 5:19 PM,,,U.S. stocks jump, Dow, Nasdaq, S&P all set highs. NEW YORK, July 16 (Reuters) - Stocks powered ahead across the board on Friday, capping a week of record-setting sessions as Wall Street toasted good corporate earnings. The Dow Jones industrial average rose 23.43 points, or 0.21 percent, to 11,209.84, beating Monday's record of 11,200.98. The technology-laden Nasdaq composite index gained 25.11 points, or 0.88 percent, to close at 2,864.48, its third consecutive record finish. The Standard & Poor's 500 index set its second straight record, rising 9.16 points, or 0.65 percent, to 1,418.78. ''The last few weeks have seen some spectacular performances by tech stocks as (U.S.) interest rates have come down,'' said Charlie Crane, chief market strategist at Key Asset Management. ''And today's performance was capped by Microsoft, the mother of all tech stocks,'' he said. ''Usually options expirations bring some extra oomph, but we didn't see that this week,'' said Barry Hyman, analyst at Ehrenkrantz King Nussbaum Inc. The week ended with a ''double expiration'' of stock options and index options. Despite setting records on Monday and Friday, the Dow index was ahead only 16.14 points on the week. ''This has been a technology rally and I think that's good for the overall market,'' Hyman said. ''The technology sector has been and will remain the leading sector.'' But he said with many technology issues looking very expensive based on their charts, it would be good to see more rotation into economically-sensitive stocks. In the only major U.S. economic data out Friday, the Federal Reserve reported that output by factories, mines and utilities gained 0.2 percent last month, the same as in May. It was the fifth consecutive monthly increase. Despite steadily rising output, businesses ran at a slightly lower 80.3 percent of their maximum capacity in June, down from 80.4 in May. Meanwhile, Morgan Stanley Dean Witter's market strategist Peter Canelo raised his 1999 profit growth outlook for the companies in the Standard & Poor's 500 index to 14 percent from 12 percent. Among the active stocks, Microsoft Corp. (Nasdaq:MSFT - news) jumped 5-1/16 to 99-7/16 on a report that the software giant is close to creating a stock to track its Microsoft Network business. Microsoft also benefited from news that a federal jury in Connecticut found that the company did not violate U.S. antitrust law in a suit brought by a small Connecticut software company. Caterpillar Inc.(NYSE:CAT - news) was down 3/8 at 59 on disappointing results. The company also said its 1999 earnings would be less than expected because of lower-than-expected sales of higher margin large equipment. Seagate Technology Inc. (NYSE:SEG - news) fell 3-9/16 to 26-7/16 in heavy trading after the world's largest maker of computer disk drives said it expected to post a loss in the current quarter. Some of the biggest movers were initial public offerings. Paradyne Networks Inc.(Nasdaq:PDYN - news), a developer of digital and analog products, jumped 39-1/4 to 56-1/4 from its $17-a-share IPO price. Audible Inc.(Nasdaq:ADBL - news) soared 12 to 21 in its IPO. The company sells audio versions of books, newspapers and radio shows online. ==========-----------============------------ Altera sinks on downgrade SAN JOSE, Calif. (CBS.MW) -- Altera Corp. shares slipped 9 percent Friday after Morgan Stanley Dean Witter downgraded the stock to "outperform" from "strong buy." The brokerage predicted in a research note that Altera (ALTR: news, msgs) will experience slower growth than it has in the past. Morgan, however, raised Altera's 12-month stock-price target to $52 from $45 a share. Shares of Altera closed down 4 1/4 to 41 1/16 on volume of 13.5 million. Morgan analyst Mark Edelstone wrote that he expects the stock's fundamentals to remain strong, but he noted that its shares have doubled in price since February. The chip manufacturer posted a second-quarter profit Thursday of $51.1 million, or 25 cents a share. These results were in line Morgan Stanley's estimate, as well as the consensus estimate compiled by First Call. See Tech Report. The brokerage maintained Altera's 1999 earnings estimate of $1.02 per share but increased the fiscal 2000 estimate to $1.30 a share from $1.28. The First Call consensus estimate for the year 2000 is $1.34 per share. Shipping delays that brought on lower-than-expected packaging yields and caused a $3 million to $4 million loss in revenue were reduced in the second quarter and now appear to be fixed, according to Morgan Stanley. Tad LaFountain of Needham & Co. maintained his "hold" rating on Altera but said in a research note that any significant price increase would trigger a rating reduction. ==========-----------============------------ Friday July 16 5:01 PM ET,,,,Dell Sees Expansion By Jeff Franks AUSTIN, Texas (Reuters) - Dell Computer Corp. (Nasdaq:DELL - news) executives Friday predicted their company would be a survivor in a contracting PC industry and vowed they would aggressively enter the market for Internet access. Speaking at Dell's annual shareholder meeting, Chairman Michael Dell predicted that one of the current top five computer makers would soon be forced out of the business. He did not name the company he thought most likely to get out, but, as is his custom, took several jabs at troubled Texas rival Compaq Computer Corp (NYSE:CPQ - news) . ''There are not, we believe, dramatic, fundamental changes going on in the industry. Prices have declined at fairly predictable levels similar to trends in other industries, and in this kind of environment the superior business model thrives and those without it flounder,'' said Dell, whose company is the king of direct sales to customers. Using a chart, Dell showed that Compaq's cost structure was ''about double'' that of Dell's, which is based in Round Rock, Texas near Austin. ''This is a market where the inefficient will not survive. I believe that one of the top five players in the PC market will drop out over the next several years,'' he said. Dell said the company was making a big push into selling Internet access along with its computers, partly in response to competitors who are offering free or low-cost machines to customers who also agree to buy Internet service. Compaq is the number one PC maker in the world with about 13.4 percent of the market, but has said it will lose money in the second quarter because of pricing pressure on excess inventory -- the same problem that struck the company in 1998. Houston-based Compaq, which has traditionally sold most of its computers through resellers, fired chief executive Eckhard Pfeiffer in April and is looking for a replacement. Dell, according to industry figures, is the second leading PC company, with 9.2 percent of the global market, followed in order by IBM Corp., Hewlett-Packard Co. (NYSE:HWP - news), and Gateway Inc. (NYSE:GTW - news) Dell's stock has been stagnant in recent months, partly because of concerns that its sales growth may be flagging. The chairman told shareholders that computer stocks generally had been affected by concerns about interest rates, the Y2K issue, lower sales prices, and ''the implosion of a number of our competitors.' ==========-----------============------------ Industry Analysis,,,Jul 16, 1999 Semiconductors: PMC-Sierra's Results Set the Standard for Other Techs to Follow by Chris Bulkey (7/16/99) With its strong second quarter results, PMC-Sierra (NASDAQ:PMCS - news) has strengthened its position as a dominant provider of integrated circuits (ICs) for the broadband communications infrastructure market. Blowout earnings have sent the shares soaring $14 to $84 in Friday afternoon trading. In assessing the feedback from the conference call, it is apparent that PMC is the best-positioned supplier of broadband ICs, and is quickly becoming an institutional favorite. With the explosion of Internet traffic continuing to strain information infrastructure, and the best regarded R&D in the industry, PMC will continue to enjoy explosive growth. Second quarter revenue increased 48% from the prior year, while earnings (excluding gains on sale of investments and in process R&D acquisition charges) rose 57% to $0.22 per share, $0.03 ahead of The First Call consensus. The upside in the quarter came from the top-line, as PMC easily exceeded analysts' revenue forecasts. Sequential revenue growth has been impressive. Over the past four quarters the top line has increased by 5.5%, 7.8%, 10.4% and 18.2% sequentially indicating that momentum is accelerating. The only two customers accounting for more than 10% of sales were Cisco (NASDAQ:CSCO - news) and Lucent (including Ascend) (NYSE:LU - news) . On the conference call, management indicated that visibility has improved, book to bill came in solidly above 1.0, and that bookings reached record levels. Management indicated that sequential revenue growth will be 'strong', and should exceed 10% in the third quarter. In all the tone of the conference call was extremely bullish. Gross margin increased to 77.9% from 75.1%, while operating margin expanded to 39.9% from 36.9% in the prior year. The balance sheet also improved with cash increasing to $140 million ($1.95 per share), while leverage remained minimal. Days sales outstanding dropped sequentially to 37 from 44, while inventory days came in at 37 days versus 42 in the first quarter. Management indicated that the fastest growing segment was T1/E1 chip applications, which essentially enables data communications to be transferred across wide area networks (WAN). PMC also saw strong growth in ATM and SONET applications, both of which have high growth opportunities due to the insatiable demand for bandwidth in telecommunications networks. On the new product front, the company has begun shipping products in the Gigabit Ethernet area. Management does not expect sales in this area to ramp substantially this year indicating that they will likely constitute less than 10% of sales, but the roll-out highlights the company's intention to become the #1 provider of broadband chips. PMC also rolled out a new VORTEX chipset, which is expected to be one of the best ways to facilitate xDSL transmission. Management believes that there is no similar product on the market indicating that interest among DSLAM vendors has been strong. The company also indicated that the sales force garnered 350 new design wins, and sees over 1,700 additional opportunities. To help meet the accelerating demand for its products the company will be adding 130 design, marketing and sales marketing staff over the next few quarters. High growth areas inevitably attract competition, but at this point there is simply no company that has the breadth of products and top-notch execution to compete with PMC. Currently, the three most comparable competitors are Applied Micro Circuits (NASDAQ:AMCC - news) , Transwitch (NASDAQ:TXCC - news) and Vitesse Semiconductor (NASDAQ:VTSS - news) . Prudential analyst Hans Mosesmann makes an interesting comparison in contrasting PMC's sequential revenue growth and gross margins to its competitors. Sequentially, PMC generated 18.2% revenue growth, compared to 10.1% for AMCC, 11.5% for Transwitch, and 9.2% for Vitesse. PMC's 77.9% gross margin easily exceeds 67.5% for AMCC, 65.1% for Transwitch, and 63.4% for Vitesse. Analysts were quick to bump up estimates. Hambrecht & Quist analyst Jeffrey Lipton lifted his 1999 estimate to $0.91 per share (from $0.76 per share) and to $1.23 per share (from $0.98 per share) in 2000. PMC shares are expensive with a forward multiple of 67 times Lipton's 2000 forecast. PMC, however, is a dominant IC broadband chip supplier with flawless execution, earnings momentum and increasing visibility, which warrants a premium valuation. In terms of an entry point it is difficult to wait for a pullback due to the incredible momentum being achieved. Imvestors should build a position slowly to take advantage of any potential pullbacks. Botoom Line: With fundamentals strengthening there is no reason the shares can not maintain a current multiple in excess of 90 times (the recently revised estimates). That implies a price 12-18 month price target of $112 based on Lipton's 2000 estimate. ==========-----------============------------ Friday July 16, 1:45 PM,, Veritas shares up after strong Q2 results NEW YORK, July 16 (Reuters) - Shares of Veritas Software Inc. (Nasdaq:VRTS - news) jumped more than 12 percent on Friday as analysts made positive comments about the data-protection company on the heels of a strong second-quarter earnings report. The stock was up 6-7/16 to 59-3/4 in afternoon trading. Earlier, shares touched a new 52-week high of 60-7/8. On Thursday, Veritas said pro forma earnings per share, on a diluted basis, were $0.16 in the second quarter, up from $0.08 in the year-ago period. Revenues jumped to $155.7 million from $91.6 million. The company ''has cemented its leadership position in the storage management software market and we believe strong growth in earnings per share and revenue is achievable going forward,'' said DeutscheBanc Alex Brown analyst Chris Mortenson. Mortenson said he expects growth of 50 percent ''or so'' from the company in the future. Goldman Sachs said it started coverage of the company with a market outperform rating, noting the strong results, especially the 70 percent jump in revenues. Goldman said it expects earnings of $0.67 a share for 1999 on revenues of $647 million. For 2000, it expects earnings of $0.92 a share on revenues of $944 million. ==========-----------============------------ Friday July 16 6:47 PM ET,,,Schwab Earnings Rise 98 Percent SAN FRANCISCO (AP) - Second-quarter earnings at Charles Schwab Corp. (NYSE:SCH - news), the nation's leading discount and online broker, surged 98 percent, slightly exceeding Wall Street expectations. However, after the company also said Friday that major investments in technology, advertising and personnel would hold down earnings in the second half of the year, shares of Schwab fell by 5 percent. Schwab stock closed at $52.433/4, down $2.933/4 on the New York Stock Exchange. Second-quarter earnings totaled $151 million, or 18 cents per share. The San Francisco-based financial services firm earned $76.3 million, or 9 cents per share, in the year-ago period. Analysts surveyed by First Call had projected earnings of 17 cents per share. The company's second-quarter revenues were $982.1 million, compared to $638 million in last year's second quarter. Schwab said it was handling $592 billion in customer assets, up $100 billion from the year-ago period, and had opened 422,000 online trading accounts during the quarter. For the six months ended June 30, the company earned $293.9 million on $1.9 billion in revenues. In the year-ago period, Schwab earned $144.3 million on revenue of $1.2 billion. Chairman and CEO Charles Schwab said the company's second-quarter 15 percent profit margin may not remain as high in the future. ''Our ongoing investments in people, technology and our brand may cause our profit margin for the second half of 1999 to move back towards the levels we've achieved in recent years,'' Schwab said in a statement. ==========-----------============------------ Friday July 16 6:58 PM ET,,,Microsoft Hits Record On Expected Internet Equity SEATTLE (Reuters) - Microsoft Corp. (Nasdaq:MSFT - news) stock surged 5 percent Friday to a record high on expectations the software giant will establish a separate tracking stock for its Web properties to cash in the Internet investment craze. Microsoft declined to comment on a report the company might announce the new tracking stock at its annual meeting with financial analysts in Seattle next Thursday. A company spokeswoman said only that a tracking stock is an idea Chief Financial Officer Greg Maffei and others have considered ''several times over the past couple of years.'' But analysts said they thought the new issue was likely as the company seeks to unlock the value of its massive investment in online properties and attract and retain new talent in the face of competition from high-flying Internet startups. ''It would give Microsoft some additional currency to go acquire new Internet properties,'' said Bill Epifanio of J.P. Morgan. ''It would also give them options on those tracking shares that would help them attract good talent.'' Microsoft ended up $5.06 at $99.44, pushing the company's market capitalization past an unprecedented $500 billion and propelling Chairman Bill Gates' stake to nearly $100 billion. In addition to the tracking stock report, first published in The Wall Street Journal, Microsoft got a boost from a federal jury's decision to award Bristol Technology Inc. just $1 in the first antitrust trial against the company to reach a verdict. Analysts also said they expected Microsoft to beat the consensus estimate by one to two cents a share when the company reports its fourth-quarter earnings Monday. Microsoft is expected to report earnings of 36 cents a share, compared with 25 cents a year earlier, according to First Call. Microsoft executives long have complained the company's stock price does not reflect the full value of its Internet investments compared with ''pure play'' rivals like Yahoo! Inc. While Microsoft's stock continues to provide a handsome return for investors, the company has seen a growing trickle of defections by middle managers lured by the potential riches of Internet startups. The lack of an Internet-type stock currency also has been cited as one of the reasons the world's biggest software company has been unable to recruit a high-profile executive from outside the company to lead its online business since group Vice President Pete Higgins departed last year for an extended leave of absence. ''As they look out across the organization they realize they need some new blood at executive levels, but the executives they want really want to be running their own shops,'' said analyst Rob Enderle of Giga Information Group. A tracking stock theoretically would trade at some multiple of the estimated $800 million in annual revenues from businesses including MSN Internet access and related content properties grouped under the msn.com portal site. But the move would stop short of spinning off the properties into a separate company as advocated by some. ''My thought all along has been that what they should do is spin the thing off,'' said Scott McAdams, president of McAdams Wright Ragen, a Seattle brokerage. ''They're probably still of the mind that they can compete effectively as a very large organization and they're better off having all these things under one umbrella,'' he said. ''It's been the legacy of the company.'' Enderle questioned whether Microsoft was nimble enough to compete effectively in the rapidly consolidating Internet space, comparing the 24-year-old Redmond, Wash.-based company with lumbering giants like Hewlett-Packard Co. (NYSE:HWP - news) and International Business Machines Corp. (NYSE:IBM - news) ''They are not being thought leaders right now,'' he said. ==========-----------============------------