M2,
Looks favorable for semi's in this news letter. Sorry about the length. I didn't edit it.
NW
Subj: EARNINGS SPOTLIGHT SHINES ON YAHOO!, MOTOROLA, ADVANCED MICRO DEVICES, & MORE IN WHISPERNUMBER.COM's WhisperWeekly: Earnings Outlook for the Week of October 9, 2000
Date: 10/9/00 12:23:21 PM Eastern Daylight Time
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********************************************************WhisperWeekly Shines Earnings Spotlight on Yahoo!, Motorola, Advanced Micro Devices, Applied Micro Circuits, Iomega, and Juniper Week of October 9, 2000 Get ready for the markets to be inundated with a flood of earnings reports. On Tuesday the third quarter reporting season begins in earnest. Warning activity has returned to normal levels, marking the end of a momentary golden age for corporate earnings. Nontheless, based on investors' expectations for the companies covered in this week's edition of WhisperWeekly, things look as good as ever. Tuesday:
View WhisperBlast for Yahoo! According to WhisperNumber.com, investors predict Yahoo! Inc. (Nasdaq:YHOO) will report a modest upside surprise when it announces third quarter results on Tuesday. Anticipating strong sequential growth of its bottom line, the WhisperNumber indicates earnings are likely to reach $0.13 per share. The consensus, meanwhile, remains a penny lower at $0.12 per share, in line with the financial results of the prior period. In mid-July, Yahoo! blew away the market's uninspired expectations. The CA-based new media Goliath posted surprisingly strong EPS of $0.12 for its second quarter, sliding past both the consensus and the
WhisperNumber by one and two cents per share, respectively. During the period immediately after Yahoo!'s stunning performance, exuberant shareholders engaged in heavy volume pre-market trading, making their presence felt with an 8-point post-earnings rally. Yahoo! also posted $270 million in revenues for the period, up from $128.5 million in the second quarter of 1999. Concurrently, net income skyrocketed from last year's $27.1 million, or $0.05 per share, to $74 million in the quarter ending in June 2000. Despite the cautious, restrained tone of Wall Street's "official" expectations for Yahoo!'s third quarter, analysts everywhere agree that the Web leader is poised to top the market's EPS expectations once again as it steps back into the eanings spotlight on Tuesday, although an encore of its second quarter performance is unlikely.Bob Hiler, an analyst at Credit Suisse First Boston, recently described the prevailing outlook: "We don't expect Yahoo to miss estimates," he said, "But we don't expect a blowout." Yahoo!'s success during the third quarter hinges largely on the health of the online advertising market - as the source of nearly 80% of the company's annual income. Negative comments issued by analysts, along with the growing threat of budget woes and death for many dot coms, knocked shares in Yahoo! into a tailspin, sending them plummeting toward a 52 week low of 82 1/4 set around this time last year. Although it is true that many Internet companies are slashing their marketing budgets or simply dying out in the intensely competitive industrial landscape in which they must learn to survive, a joint report issued several weeks ago by the Internet Advertising Bureau (IAB) and PricewaterhouseCoopers concludes the Web is still a viable arena for companies that rely on advertising dollars. According to the study, online ad revenues hit $2.1 billion in the second quarter, up almost 9% from $1.95 billion in the first quarter of 2000. "I think the overwhelming conclusion is that the online
advertising marketplace is still alive and well," said Rich LeFurgy, chairman of the IAB. "It is still continuing to show the marketing strength that it has exhibited" in the past. This report contradicts a growing consensus among analysts' that the recent decline of technology stocks, combined with the demise of many eBusinesses, is destined to translate into a major revenues slump for key Internet companies. According to Tom Hyland, chairman of PricewaterhouseCoopers' New Media Group, traditional advertisers are filling the holes once occupied by promotion-crazy dot coms in the Net marketing space. Hyland also emphasized that advertising money is following the traffic, resulting in a marketing boom for high profile sites and portals like Yahoo! "While there have been difficulties experienced by dot-coms," he explained, "those ad dollars are just being concentrated into more of the efficient providers...sites that are going to ring a better audience."On the heels of the report, Merrill Lynch's star Internet analyst Henry Blodget stepped up in defense of the Internet media giant. He reiterated a buy rating, reporting in a note to his clients, "We remain very confident that the company will meet or exceed our 3Q estimate of revenues of $280 million (we think $290 million range is likely). We do not think the company will miss the quarter." Last week Blodget piped in again to support the downtrodden Yahoo!. He suggested that recent concerns about ad revenues were way overblown, and urged investors to stop selling. Instead, he commented, they should "consider the cash-flow benefits" of Yahoo! to determine of the value of its stock. Bear Stearns' Jeff Fieler also pounded the table on Yahoo! in a recent report. "Every broader data point on e-commerce and online advertising spending that we have lead us to believe that fears of YHOO missing the quarter are unfounded," he concluded. "In fact," Fieler added, "we would be surprised if YHOO did not
easily meet our $282 million revenue estimate and $0.12 operating EPS estimate." He wrapped up his comments, describing Yahoo!'s recent slump as an ideal buying opportunity: "investors should take advantage of weakness to accumulate positions in YHOO," he advises in anticipation of a post-earnings rally. "Following the price action of Q2, where the shares of YHOO appreciated approximately 35% in the 10 trading days following the company's report, we would expect the company to see similar appreciation going into and following the company's Q3 report."
View WhisperBlast for Motorola WhisperNumber.com finds investors anticipating a modest upside surprise from semiconductor and communications technology heavyweight Motorola, Inc. (NYSE:MOT) when it announces third quarter results on Tuesday. Analysts' expectations peg the consensus at $0.26 per share. The WhisperNumber, meanwhile, is only a penny higher, reflecting an average EPS forecast of $0.27 per share. Investors may have held their earnings expectations for Motorola in check, judiciously waiting for insight into the profitability of its handset division. A couple of the world's mobile phone leaders - including Finland's Nokia (NYSE:NOK) and Sweden's Ericsson (Nasdaq:ERICY) - raised a red flag for shareholders in the Schaumburg, IL-based company during recent weeks after they warned that deteriorating margins will dent profits for their mobile phone businesses. Orders at Motorola's handset unit are expected to fall back from last year's unusually high levels, however margins are likely to improve for the second consecutive period due to a renewed focus on profitability. Analysts are looking for the division's margins to fall between 5.5 to 6.5% in the third-quarter, up from 4% in the previous period. In the second quarter, the company reported a sharp increase in phone profit margins, following a 41% nosedive in the in the preeceding period. Last week, Motorola confirmed it did not change its forecast for the quarter, reporting that expectations remain in line with the consensus at $0.26 per share. Fred Kuznik, managing director for Europe, Middle East and Africa, also remarked that handset margins are on track to meet estimates, in a bid to alleviate the concerns responsible for the sudden drop in the company's stock. "We will improve our margins [on mobile phones] in the third quarter," he stated, adding, "we have even indicated further margin improvements in the fourth quarter.''The market, however, was not mollified by management's word, even though Wall Street adopted an essentially unwavering faith that the company will meet EPS forecasts. Shares in the technology firm are currently trapped in a tight trading range slightly above their new 52-week low set last week at 27 1/4, down more than 50% from a high of 61 1/2 set in early March. Last week, the stock plummeted more than 10% amid unconfirmed rumors that the company would miss third-quarter financial estimates. Noting that "they delivered well in the second-quarter," Lawrence Borgman of Josephthal & Co. is confident the company will repeat this success, achieving "the same thing in the third and fourth quarters." Ed Snyder of Chase H&Q is eagerly awaiting verification of this assertion, and continues looking for signs of improvement in Motorola's handset unit. "If they do well in margins and they have decent revenues, their stock is going to rock," he bluntly stated.Last Friday, Credit Suisse First Boston's Marc Cabi spoke out in support of Motorola, reiterating his buy rating on the semiconductor and wireless company's stock. In a research note, the analyst commented, "while we see limited upside on the quarter, we believe the company is attractive at current levels near 19 [times 2001] earnings.'' He expects the company's third-quarter revenues and earnings per share to be in line with Wall Street's expectations. Paul Sagawa, an analyst at Sanford C. Bernstein, also expects "sequential improvement in the operating margins of most of its businesses," specifically the mobile phone and semiconductor divisions, however sees little room for an upside surprise. "Motorola's big problem is being profitable vs. growing its market share," he said, adding that he wouldn't be surprised to see mobile-phone sales volume fall in the period, partially offsetting the effect of advancing margins on its bottom line. Wednesday:
View WhisperBlast for Advanced Micro Devices Advanced Micro Devices Inc. (NYSE:AMD), the first viable threat to Intel's (Nasdaq:INTC) role as King of the semiconductor arena, is poised to trounce Wall Street's EPS estimates on Wednesday. In anticipation of strong third quarter growth, the WhisperNumber stands at $0.67 per share - a clear sign that investors are bullish for the Sunnyvale, CA-based company. Analysts expect modestly lower earnings of $0.61 per share, in line with the results of the previous quarter and more than a nickel below WhisperNumber.com's forecast.
Although institutional ownership accounts for 89% of AMD's float, investors' expectations have historically determined the course followed by its stock price in the period immediately after the release of a quarterly earnings report. For the past few weeks, shares in AMD wallowed in the mid 20s, down sharply from their 12-month high near 50 on a wave of profit warnings that rocked Wall Street. Intel triggered the sector's partial collapse in mid-September, warning investors that sluggishness in the European market will depress its top line growth for the current period. Analysts apparently chose to ignore numerous assurances made by AMD throughout the quarter that it remains on track to ship its goal of 3.6 million Athlon and Duron processors - twice as many chips as in the prior quarter. In their typical lemming-like fashion, a handful of so-called investment professionals took the plunge, jumping on the bandwagon and downgrading the weakened AMD. Sudeep Balain took one of the first swings: the Chase Hambrecht & Quist analyst lowered his 12-month price target on the stock to $35 a share, less than half its original level of $75, and slashed his rating to market perform from strong buy. In a research note to clients, he also said that, while the company's third quarter is "intact," because of Intel's pending revenue shortfall, he cautioned that AMD's stock "will continue to be under pressure in the short term."Deutsche Banc Alex Brown was next to chime in: Analyst Erika Klauer downgraded shares in AMD from buy to market perform and reduced the stock's 12-month price target to $30 from $60 in the wake of Intel's announcement. As she explained in a recent research note, "we do not believe AMD has been immune to the ill effects cited by Intel in Thursday's pre-release," since the two companies compete in the same market. The analyst also turned bearish on 2001, voicing concern that, "Intel's efforts to more rigorously defend market share and more players, particularly in the mobile space," will undoubtedly subject AMD to heightened competitive pressures in
coming months. Danny Lam of FHI Research, however, bucked Wall Street's Conventional Wisdom, arguing that Intel's problems are specific to Intel. He maintained that Intel's supply constraints - evidence of strong demand according to most analysts - are instead evidence of production bottlenecks caused by the company's wafer stepping machines. Used to link discrete components on a microchip, these machines impose a ceiling on Intel's production capacity, which - Lam argues - eventually led to the company's decision to weight its product mix in favor of higher-margin, more expensive Pentium III processors, and away from its low end Celerons. Consequently, according to Lam, Intel effectively priced itself out of the European market, where weak currencies have systematically decimated the purchasing power of consumers and businesses. Thus, AMD was free to reign the henhouse in its absence, stealing market share from its rival and picking up slack demand with its own chips, which sell at sharply lower average prices than the competing products. . Needham & Co. analyst Dan Scovel appears to agree, suggesting that Intel's woes were caused by more than just demand weakness. "Part of the problem [in Europe] may be incremental market share gains by AMD," he said. "We know Intel had problems at the high end of the microprocessor space. And at the same time, AMD hasn't been doing bad at the high end."Thus, Scovel rates AMD a strong buy, and Intel as a hold. "From their minority market share position and sub-$100 ASPs, AMD has an opportunity to move into the Intel space, with their $200 ASPs," he says, confident "there are room for gains there." Last week AMD's shareholders were given another shot of confidence: citing strong demand for Internet and wireless equipment, the Semiconductor Industry Association (SIA) reported that worldwide semiconductor sales grew 53% to reach an all time high of $18.2 for the month of August. Perhaps evidence supporting Lam's theory, the report found that sales rose in all major geographical regions, including Europe, where they were up 46% year-over-year. . View WhisperBlast for Applied Micro Circuits Corp.Fueled by the explosive demand for bandwidth,
optical networking component supplier Applied Micro Circuits Corp. (Nasdaq:AMCC) is expected to top analysts' earnings forecasts for its second fiscal quarter. According to WhisperNumber.com, investors' EPS expectations yield a WhisperNumber of $0.26. Wall Street's consensus - pegged at $0.23 - predicts the company will reveal a more moderate rate of sequential growth when it announces quarterly results on Wednesday. In mid July, Applied Micro Circuits reported second quarter EPS of $0.21, landing squarely on target with the WhisperNumber - a reflection of individual investors' earnings expectations. Wall Street's forecast fell four cents shy of the actual bottom line results, landing at $0.17 per share. Net income also grew impressively, surging 310% from $6.8 million in 1999 to $27.9 million in the first quarter of FY 2000 on the "phenomenal revenue growth" from its transceivers unit and digital framer business. As the second quarter wound down, analysts became increasingly bullish on AMCC's prospects for another blockbuster performance, resulting in a sharp rise in the price of the company's stock. On September 29, shares in the optical networking equipment firm peaked at a 52-week high of 219 1/2, before settling approximately 30 ticks lower in a trading range around 185 per share. Commenting on the strategic benefits of several recent acquisitions, Arun Veerappan of Robbie Stephens reiterated a strong buy rating on the stock. In a note to his clients, the analyst explained, "we continue to maintain our current estimates on AMCC for the second quarter," expressing confidence in his belief that the company remains, "on track [to report] $89 million in revenue and $0.23 in earnings-per-share." Last Friday, BlackRock Managing Director Amy Hogan provided further insight into the market's bullish outlook for AMCC. "[The company is] growing very rapidly not only year over year but sequentially as well," according to the fund manager. Hogan highlighted the 30% sequential rate of growth achieved by Applied Micro Circuits in the previous quarter, reporting, "we think that growth could possibly even accelerate." Thursday:
View WhisperBlast for Iomega Pegged at $0.10 per share by self-directed investors, the WhisperNumber for Iomega Corporation's (NYSE:IOM) third quarter earnings is nearly twice as high as the Street's forecast. The consensus estimate, meanwhile, predicts EPS of $0.06 per share. For its second quarter ended in June, Iomega posted pro forma earnings of $0.09 per share. Although the company managed to trump Wall Street's official forecast by a comfortable two-cent margin, EPS remained three cents shy of the $0.12 WhisperNumber. Iomega's failure to meet investors' expectations was due largely to a $45 million reduction in revenues, which fell to $303.6 million from $348.8 million in the second quarter of 1999. The steep year-over-year decline was blamed on sluggish sales of Zip drive and disks. Iomega's bottom line could get a lift in the third quarter from a multi-million dollar purchase order made by OfficeMax Inc. (NYSE:OMX) in mid September. According to the storage solutions company, this deal is the largest single retail order in its history.Michael Feuer, OfficeMax's chairman and chief executive officer, reported, "We expect to give our customers over 60,000 Zip drives during the
promotion." Iomega also announced plans to supply the retailer with a full range of storage products that will be offered to OfficeMax customers throughout its fall promotion schedule. "This is an enormous win for Iomega" commented president and CEO Bruce Albertson, pleased "with OfficeMax's decision to sweeten every Windows Me...[with] a free Iomega Zip drive" and "OfficeMax's decision to broaden its Iomega product line offerings during its fall promotion." In September, Iomega kicked off a similar agreement with Radio Shack (NYSE:RSH) to supply the chain of retail stores with its line of data
storage products.
View WhisperBlast for JuniperSelf-directed investors predict a monster upside surprise from Internet infrastructure solutions provider Juniper Networks, Inc. (Nasdaq:JNPR) when it announces third quarter financial results after the market's close on Thursday. The WhisperNumber is pegged at $0.14 per share - nearly double the previous period's EPS of $0.08. Anticipating modest sequential growth, Wall Street's forecasts predict a conservative $0.09 per share. In mid-July, shares of Juniper spiked after the company posted a second quarter profit of $0.08 per share, sailing past the Street's official EPS estimate of $0.04 per share as well as an optimistic WhisperNumber, pegged two cents higher at $0.06 per share. Chief Executive
Scott Kriens attributed his company's explosive growth to the ongoing evolution and rapid expansion of the Internet. Revenues grew 77% sequentially to $113 million, he reported, supplying the traction required to gain momentum and maintain a stellar rate of growth. Kriens also indicated that the company has barely scratched the surface of this mammoth iceberg: "Our results this quarter are representative of the opportunity we see to build the global IP infrastructure." Looking forward, "As we continue towards the next milestone in building Juniper Networks into a franchise, we remain focused on relentless execution," he said in a prepared statement. Impressed with evidence of Juniper's dedication and capacity to execute on this promise, CS First Boston analyst James Parmelee was speechless. "Wow!" he exclaimed, "visibility is excellent entering the second half of 2000." Negative comments about this company are few and far between, while analysts everywhere seem to be singing its praises. In mid July, Robert Lee, Senior Vice President and Portfolio Manager for Sentinel Advisors Company, even went as far as to liken the company to Cisco Systems (Nasdaq:CSCO) While attempting to explain his bullish attitude on Juniper, he insisted, "Right now they are the only real challenger to Cisco..." In late August, Raymond James analyst Todd Koffman, elaborated on this theme, upgrading the maker of optical IP networking equipment to a strong buy rating from a market perform. Following an "upbeat meeting" with Juniper's management team, the analyst commented that the competitive environment is "very favorable" for the company, expressing confidence that its "product capabilities remain ahead of Cisco's." As the company prepares to report quarterly results, analysts are once again pounding the table on Juniper, convinced that an encore performance is imminent. Little more than one week ago, Lehman Bros issued an extremely bullish earnings outlook on the company. In a lengthy note, the research team indicated that, "JNPR is likely to exceed our top line estimate of $147 million [or 30% sequential growth) when the company reports results...[on] Oct 12," a list which continues to grow until it encompasses nearly every gauge used to forecast, measure, and evaluate the company's performance. Reporting that margins, international sales (especially in Europe and Asia), revenues, and "strengthening momentum fueled by new products," are all likely to exceed expectations, these trends, "should also enable JNPR to beat our EPS estimates of $0.09." Lehman concludes its report by reiterating a "1 Buy" rating on the company's stock and a price target of $265 per share, noting, "We continue to believe these estimates may prove conservative.bv
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