Industry Briefs from Friday (Review)
Industry Briefs
Computer Systems & Peripherals | Networking | Internet | Semiconductor | Semi Equipment | Software | Telecom Equip | Telecom Services
Computer Systems & Peripherals
Industry Members
5 Hot Stocks under $15 : MSN users will see a list of "5 hot stocks under $15" highlighted on the home page this morning. List compiled by CNBC Business Center and The Wall Street Journal. Listed are Xerox (XRX 8.76 +0.16), Palm (PALM 4.14 +0.10), Kmart (KM 12.01 -0.70), Worthington Industries (WOR 14.25 -0.23), Office Depot (ODP 13.03 -0.12).
Dell Computer (DELL) 23.00 -2.38: Merrill Lynch defended Dell this morning, viewing the weakness related to last night's guidance as a buying opportunity... said DELL outperformed the industry across all geographic and product segments... company essentially confirmed Merrill's recently reduced view for Q3... firm trimmed rev. forecast and maintained its conservative Q3 EPS est. of $0.15....Lehman analyst Dan Niles remains cautious on stock and reduced his already below-consensus CY01 estimate to $0.63 from $0.66....Bear Stearns analyst Andy Neff said PC industry is ripe for structural change and said odds of consolidation are clearly increasing; believes DELL can emerge as a winner from price war and consolidation.
Hewlett-Packard (HWP) 24.05 -0.08: Lehman Brothers resumed MARKET PERFORM due to firm's continuing concerns on the macro IT spending environment (especially internationally) and consumer demand which firm believes is deteriorating; yesterday, HWP posted Q3 results with revenues down 14% yr/yr and EPS net from continuing operations of $0.11 which beat the pre-announced expectations of $0.04; though HWP trades at a reasonable valuation, company's comments imply revenue growth of mid to high single digits in Q3; firm noted this is more optimistic than others like Dell and Compaq which are forecasting declines of 0 to 5%.
ScanSource (SCSC) 52.59 +3.23: Raymond James upgraded to STRONG BUY from BUY rating and price target of $70 after company reported stronger-than-expected Q4 EPS; based on firm's belief that the stock can support a high-teens multiple and that earnings will grow at a compounded rate of 20-25% over the next two years; despite poor economic conditions, management has done an extraordinary job of consistently exceeding expectations; firm suspects that recent acquisitions should, at the very least, help to solidify the outlook, and may provide some additional upside. Also, Robert W. Baird upgraded to STRONG BUY from MARKET OUTPERFORM and upped price target to $62 from $57; cited the relatively strong results in the face of a difficult market and a positive outlook, as well as an attractive valuation.
Networking
Industry Members
AsiaInfo (ASIA) 15.03 -0.81: China Unicom selected AsiaInfo to build a billing system for its new CDMA network.
CSFB on CS Spin-offs : CSFB said Riverstone (RSTN 12.31 +0.32) and Enterasys (ETS 13.05 -0.09) are attractive; said both should meet Aug qtr expectations with strong pipelines providing decent visibility into Nov qtr, and both trade at discounts to peers.
Internet
Industry Members
Agile Software (AGIL) 9.75 -1.05: Morgan Stanley downgraded to NEUTRAL from Outperform; with company's backlog now depleted, reported revenues will reflect underlying order growth, which doesn't show signs of acceleration... lowered 2002 est. to ($0.49) from ($0.20) and 2003 to ($0.17) from $0.12.
E*TRADE (ET) 5.45 -0.19: Raymond James continues to rate the stock a STRONG BUY; while E*Trade does not report transaction activity on a monthly basis, its shares have been under pressure as a result of July activity reports from several of the company's major competitors which suggest market activity slowed in July from low June levels; brokerage firm believes this company is worth $10 per share as the sum of its parts, based on its estimates for the value of the components.
EarthLink Ntwrk (ELNK) 13.15 -0.02: Announced that its 16 mln share public offering priced at $12.50. Sprint was the selling shareholder.
Travelocity.com (TVLY) 24.53 -1.17: Robertson Stephens feels that recent weakness reflects an overreaction to competitive threats.
Semiconductor
Industry Members
General Semi (SEM) 11.90 -0.58: Manufacturer of power management devices announced details of the restructuring plan; expects total annualized cost savings of approximately $25 mln and expects to take pre-tax charges in Q3 of up to $60 mln; company will close its facility in Ireland, and will transfer the majority of these product lines to its Taiwan and China facilities, while outsourcing production of certain other products to subcontractors; makes additional headcount reductions totaling approximately 3% of workforce.
Maxim Integrated (MXIM) 46.21 -2.69: After MXIM's earnings report, Lehman said it would continue to avoid stock as recent run-up anticipates an overly optimistic recovery scenario; sees no improvement in end-user demand, relatively high inventories, and worsening economic conditions outside of the US. Merrill Lynch reiterated intermediate/long term BUY rating after company reported earnings and warned of lower than expected revenues; brokerage believes that Maxim management is being deliberately conservative; company is seeing its backlog stabilize as had been expected; cost control, especially with regard to Dallas Semiconductor, has been remarkable.
TranSwitch (TXCC) 8.80 -0.42: Announced acquisition of privately held Onex Communications Corp for approx. $89 mln, of which $20 mln will be paid in cash... TXCC sees Q4 dilution of about $0.03-$0.05 from the purchase. Frost Securities maintained BUY rating and price target of $23; brokerage views the combination favorably; believes the company is well positioned to be one of the leading long-term vendors to the access and metro markets.
Semi Equipment
Industry Members
There was no news of note in the Semi Equipment industry.
Software
Industry Members
AsiaInfo (ASIA) 15.03 -0.81: China Unicom selected AsiaInfo to build a billing system for its new CDMA network.
Cerner (CERN) 52.95 -0.17: Stock highlighted as SG Cowen's Action Idea of the Day; firm recommended buying the stock today after meetings with management confirm view that Q3 bookings will equal or exceed Q2's record level... thinks EPS upside is likely.
Comverse Tech (CMVT) 29.85 +0.34: Merrill Lynch upgraded to near-term ACCUMULATE from near-term NEUTRAL, after weighing the risks and opportunities, including current valuation level and expected growth rate from current reduced projections; firm thinks that voice mail excess inventories will be consumed in 2H2001, and therefore, expects growth to resume in 2002; on top of voicemail growth, firm expects SMS and Unified Messaging revenues to grow at high rates; longer term, firm also thinks CMVT could prove to be the winner in UM, by leveraging its strong VM position.
eFunds (EFDS) 17.05 -0.42: W.R. Hambrecht initiated coverage with a NEUTRAL; eFunds provides transaction processing and risk management services to financial institutions, retailers, electronic funds transfer networks, e-commerce providers, and government agencies; while firm believes overall industry trends will benefit eFunds, near-term contract concerns warrant a Neutral rating; better insight into the metrics behind company's revenue would provide firm a greater comfort level to get more aggressive with estimates.
Intrado (TRDO) 19.45 +1.22: JP Morgan initiated with a BUY and a $29.50 target; sees EBITDA profitability in Q4, and said visibility is enhanced by long-term nature of contracts.
Microsoft (MSFT) 61.88 -2.74: Microsoft lost request to delay antitrust remedy hearing.....Prudential said that Dell's (DELL 23.00 -2.38) guidance on unit PC growth in Q3 is actually better than Microsoft's; MSFT had guided Q3 slightly up year/year, which Pru says works out to a 7% qtr on qtr decline, while Dell guided to "slightly higher" qtr/qtr unit sales; Pru also noted that MSFT's average revenue per PC is increasing; advocates buying on any weakness.
Telecom Equip
Industry Members
CIENA Corp (CIEN) 18.78 -0.84: Dain Rauscher Wessels downgraded to BUY from STRONG BUY with a price target of $24; due to company's significant long-haul exposure, brokerage lowered estimates for revenue of $1.7 bln for FY02 with EPS of $0.44 compared to $2.4 bln and $0.90 previously.
Comverse Tech (CMVT) 29.85 +0.34: Merrill Lynch upgraded to near-term ACCUMULATE from near-term NEUTRAL, after weighing the risks and opportunities, including current valuation level and expected growth rate from current reduced projections; firm thinks that voice mail excess inventories will be consumed in 2H2001, and therefore, expects growth to resume in 2002; on top of voicemail growth, firm expects SMS and Unified Messaging revenues to grow at high rates; longer term, firm also thinks CMVT could prove to be the winner in UM, by leveraging its strong VM position.
Juniper Networks (JNPR) 18.51 -1.51: Buckingham Research downgraded to NEUTRAL from ACCUMULATE, due to slowing demand for digital cable, reduced estimates, uncertain economic environment, and suspension of guidance for the current quarter and fiscal year; firm's channel checks indicate that ILEC demand could be delayed because JNPR lacks a CSCO-like method to configure the router from the keyboard; current service provider demand slowdown is due, in part, to the unwillingness of ILECs to spend their ample budgets in this environment, magnified by service providers pausing to redesign their networks to be more intelligent; below expectation growth in data traffic is unlikely to be enough to drive demand for interface cards for installed platforms.
LM Ericsson (ERICY) 4.92 -0.32: Company will adjust its organization to benefit from the ongoing globalization trend among operators and drive the technology shift to mobile and broadband Internet; company will create a market organization with new global customer units for large global customers; effective Sept. 1, Per-Arne Sandstrom, currently head of Market Area North America, will assume the role of a Chief Operating Officer.
Lucent Tech (LU) 6.34 +0.02: Merrill Lynch commented on LU ammended credit agreement; allows LU to move forward with its previously announced Phase II restructuring program; removes some of the uncertainty, but delays spin off of Agere, which some had viewed as a catalyst for the stock.
Scientific-Atlanta (SFA) 21.24 -3.77: Banc of America Securities downgraded to MARKET PERFORMER from STRONG BUY; anticipates a flattening in set-top growth and few near-term catalysts; believes company is interesting as a value play as visibility improves because of continued market share gains, no debt and strong cash flow and strong customer relationships. Also, Wachovia downgraded to NEUTRAL from BUY due to slowing demand for digital cable, reduced estimates, uncertain economic environment, and suspension of guidance for the current quarter and fiscal year.
Westell Tech (WSTL) 1.02 -0.02: After the close, Broadband access solutions company announced that its Board of Directors has authorized the open market repurchase of up to 1 mln common shares; CEO stated, "The current market price of our shares represents an outstanding purchase opportunity."
Telecom Services
Industry Members
Global Crossing (GX) 4.98 -: There were reports that Dept. of Defense cancelled a contract with the company just one month after being awarded. GX out with comment; said no official action has been taken by the DOJ, but a re-bid for the contract may be necessary after the contract was challenged by unsuccessful bidders. "While Global Crossing is confident it will win any potential re-bid, the loss of this contract would not have a material effect on the company's financial results.
UbiquiTel (UPCS) 9.30 +0.11: Thomas Weisel initiated coverage with a STRONG BUY; UPCS is trading at a 56% discount to firm's price target; company trades at a sizable discount to its peer group and firm recommends purchase of UbiquiTel at current levels; said company is among the largest Sprint PCS affiliates; UbiquiTel's management team has engineered an excellent start since inception in late 1999. |
