From Briefing.com: Close Dow +73.55 at 10426.91, S&P +6.09 at 1144.41, Nasdaq +2.58 at 1826.75: The market averages began the session on a weaker note but a divergent pattern developed thereafter that was maintained into the close. Shortly after the open the Dow began to advance with the defense, cyclical and financial stocks pacing the way. Helping to underpin defense stocks was a Morgan Stanley note which suggested that the Dept of Defense is setting a goal of 15% operating margins for defense company's. Mentioned in report were: BA (+3.3%), GD (+2.1%), LMT (+1.6%), NOC (+3.7%), RTN (+2.4%). The cyclical and financial stocks benefited from a move into issues that have outperformed for much of the quarter. In other words, it appeared that quarter end window dressing played a role. This may also have been a factor in the underperformance of the Nasdaq (+0.1%) and larger cap tech stocks (Nasdaq 100 -0.2%). Other top performing groups include gold, energy and storage. The latter sector benefited from positive pre-market comments from Merrill Lynch (reinitiated coverage) and RBC Capital (upgraded EMC and BRCD). Potentially underpinning gold (XAU +5.9%) was the introduction of bank deposit insurance caps in Japan; Japan's leading gold retailer reported a ninefold annual increase in gold sales in February. Also, energy stock drawdowns and related oil price increases may be offering some support for inflation concerns. The latter developments boosted the energy arena along with an upgrade to Varco (VRC +6.9%) by Banc of America. Profit taking and the slightly weaker than expected New Home Sales data weighed on the homebuilding sector. Low volume and low volatility dominated throughout the session with market internals ending with a bullish posture (NYSE 2 to 1; Nasdaq 5 to 4). DOT +0.3%, Nasdaq 100 -0.2%, SOX -0.7%, XOI +1.6%, NYSE Adv/Dec 2115/1039, Nasdaq Adv/Dec 1918/1552
4:17PM Juniper Networks revises down Q1 guidance (JNPR) 11.92 +0.35: Co expects revenue for Q1 to be approximately $120-$125 mln, down from the original guidance of $150-155 million. Pro forma EPS is expected to be slightly above breakeven, vs consensus of $0.02. The co's revised outlook reflects continued cautious spending on the part of service providers and carriers, as evidenced by widespread reductions in capital expenditures in the telecommunications market.
4:08PM Sonus Networks guides Q1 lower (SONS) 2.80 -0.13: Co estimates Q1 pro forma net loss of $0.08 on revs of $21 mln, vs consensus ests of a loss of $0.04 and revs of $33.8 mln; co also expects to record a $5-$10 mln charge in the qtr associated with excess inventory. "The further deterioration in the U.S. telecom industry, for both emerging carriers and even the largest service providers, has led to a decline in our revenues for the first quarter," said Hassan Ahmed, president and CEO.
3:37PM UTStarcom (UTSI) 25.26 +1.26: Shares soaring (up over 5%) on yesterday's news that co. landed $18 mln contract for service in China and positive note out of Merrill Lynch this morning. Firm writes "the Shandong province is one of the more affluent, so it is encouraging to note that UTSI beat LU and ZTEL; notes that this marks the 4th contract announced this year, now totaling $92 mln, in addition to the $360 mln backlog announced at year end 2001. Merrill maintains their near-term Buy rating and $27 price target.
3:18PM Dell Computer (DELL) 25.63 -0.56: Despite analysts' bleak outlook for the PC sector, DELL has reaped the benefits of a number of positive analysts calls this past year; shares have held steady. Today, DELL's luck appears to have changed; Soundview is cutting Q2 ests by $230 mln and $0.01 to account for their reduction to their June qtr PC unit forecasts; expects mgmt will be unlikely to talk incrementally positively about spring PC demand at 4/4 analyst meeting. Soundview continues to see the co. as a long-term winner, and would be buyers in the low $20s.
1:09PM Adelphia Comms defended by Solly (ADLAC) 18.65 -1.74: -- Update -- Salomon Smith Barney is out in defense of stock following intraday plunge from $22 to $17.75. According to firm, the Rigas family debt guarantee was already known about. The defense helped ADLAC lift more than 1 1/2 pts off its session low. However, we are being told by one source that news of the debt guarantee caught some investors on the conference call by surprise.
1:57PM Telecom Equip : Following Bernstein's move to raise carrier capex ests for H2 2002 on Monday, SG Cowen cuts ests. for service provider-focused companies (LU, NT and JNPR) to reflect flattish rev performance in H2 2002 and H1 2003. In addition, firm cuts ests for CSCO and EXTR citing more moderate y/y growth expectations, in 10-13% range. Cowen believes that consensus ests are still too optimistic (for sector) relative to several near-term spending constraints, e.g. carriers' preoccupation with accounting scrutiny, high debt levels, liquidity concerns, and reluctance to spend over maintenance capex levels.
1:15PM Intel (INTC) 30.22 -0.55: Shares faltering off $31 level, moving on Soundview's Q2 earnings est cuts (lowered by $0.01); this follows after Lehman Brothers Dan Niles cut Q1 and 2002 revenue ests on 3/8 following co's mid-qtr update. Soundview lowers ests on view that motherboard build rates in Q2 look worse than expected; adds "relatively weak demand, a difficult pricing environment, lack of a demand catalyst, already dominant mkt share and a growing depreciation burden continue to keep our ests in check." Firm continues to believe that INTC is more attractive in the mid-$20s.
1:10PM Semi Cap Equip : Thomas Weisel remains positive on the group's recovery following a survey of proprietary semi capital equipment suppliers; 74% of respondents characterized Q1's business tenor as flat to better relative to Q4 (over 50% responded "better"). Inventory levels are widely viewed as stable and improving and 71% of respondents suggested that headcounts are now stable, indicating confidence in a mkt bottom. Firm reiterates their Mkt Overweight rating on the sector and recommends KLAC (64.41 -0.72), AMAT (51.88 -0.47), and AEIS (33.80 +1.12) as ways to invest in the up cycle.
12:58PM Riverstone Ntwrks (RSTN) 5.87 +0.49: After posting in line Q4 earnings and revenue numbers yesterday, RSTN is gapping up 9.1% today. CSFB commenting that, while book-to-bill was above 1, guidance for the May Q was flat-to-down slightly on limited near-term visibility. Firm believes trial activity with the RBOCs remains healthy, and management continues to expect initial shipments by the end of the year, with volumes expected in 2003. However, while firm thinks many deals in the pipeline will get done over time, expects continued delays and worry initial ramps could be smaller than expected. Also, Wachovia is maintaining Market Perform rating, given slower U.S. and European incumbent carrier deployment schedules and the near-term risk associated with company's APAC exposure.
Andrew Corp (ANDW) 16.56 -0.64: Fulcrum initiates with a SELL rating and a $12 target; says company's ability to sell wireless infrastructure products could be substantially impacted by a longer and more severe slowdown in wireless network investments.
LM Ericsson (ERICY) 4.22 -0.01: CEO remains cautious on turnaround... Fulcrum initiates with a SELL and $2 target; cites weak global launch of 3G and continual cuts in wireless capital spending; believes 3G could be delayed 5-7 years as lower cost 2.5G takes hold; says owners of ERICY should Sell, and short-sellers should look to Nokia (NOK), which has a higher valuation and more risk to its EPS estimates.
Powerwave (PWAV) 12.98 -1.28: USB Piper Jaffray downgrades to OUTPERFORM from Strong Buy and cuts target to $18 from $25; says 2002 revenue outlook is intact but sees competition as fierce and expects continued pushouts in 2G and 3G infrastructure builds, similar to the Fulcrum concerns in its initiations of ANDW and ERICY with Sell ratings.
11:54AM Sirius Satellite subscriber totals disappoint (SIRI) 5.15 +0.72, +16%: -- Update -- Sources at SoundView telling us that firm is out with comments on SIRI's quarter. Apparently, SIRI's addition of just a few hundred subscribers was well below consensus estimate of 3,000 and missed SoundView's est of 1,000. Subscriber costs were also higher than expected at $155 per sub vs XMSR's $130. Firm said to be increasing its 2002 EBITDA loss estimate to reflect increased sales and marketing expenses; firm's 150K subscriber estimate under review. Also, SIRI expected to announce another new car manufacturer deal today.
10:48AM Nasdaq Composite Intraday : -- Technical -- Index is favoring the flatline early on. Currently trading in a congested area in the range of 1818/1822. To the upside, look for initial resistance at 1818/1822 followed by additional overhead at 1829. To the downside, watch for initial support at 1810 followed by a more important floor at 1800.
11:34AM ESS Technology (ESST) 21.54 +0.54: ESS Technology, a leading supplier of mixed-signal semiconductor solutions for multimedia applications, checked in with some good news this morning when it raised its sales and EPS guidance for Q1. Specifically, the company said it expects revenues to exceed $75 mln (consensus $69.53 mln) and net income per diluted share to be greater than $0.27 (consensus $0.23). This revision marks the second time in as many months that ESST has increased its guidance. In February, the company forecasted Q1 revenues of $68-70 mln and EPS of $0.22-0.25. The latest revision-- like the first revision-- was attributed to a very strong market for DVD and VCD players and an increase in ESST's market share in the DVD market. Today's news, however, isn't a total surprise. On Monday night, the company's CEO told Dow Jones Newswires that ESST had plans to raise its EPS target. What may come as a surprise, though, is that ESST's stock isn't prohibitively expensive. In fact, it is a value alternative in its fast-growing niche. Briefing.com said as much in a recent Story Stock we wrote on competitor Zoran Corp. (ZRAN). At current levels, ESST trades at 21.1x est. FY02 earnings, yet its valuation looks all the more appealing knowing that the consensus FY02 estimate is bound to be increased following ESST's revised guidance. Moreover, ESST has no long-term debt and close to $3.00 per share in cash and short-term investments on its balance sheet. Speculation that ESST was losing market share to ZRAN, which trades at 51.3x est. FY02 earnings, has acted as a restraining influence from a valuation standpoint, as has the insider selling by Chairman Fred Chan and his family. In light of today's announcement, though, it appears further multiple expansion is warranted as it is clear ESST is making the most of its position in one of the few sweet spots in the technology market and that it is holding its own in the face of competition from the likes of ZRAN. As an aside, ESST also said today it will be providing increased guidance for Q2 when it reports its Q1 results on April 24. Last month, ESST projected Q2 revenues in the range of $66-70 mln and EPS in the range of $0.18-0.22.-- Patrick J. O'Hare, Briefing.com
10:44AM Palm Inc: UBS raises price target to $11 from $6 (PALM) 3.79 +0.16, +4.5%:
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