From Briefing.com: General Commentary - Yesterday's rally caught us by surprise, less for the magnitude of the advance (5%) than for its timing. That the Nasdaq ran to, and slightly through, its 50-day moving average wasn't a big surprise. This ceiling has acted as both a magnet and a cap for most recovery tries over the calendar year. But that the index would surge in the face of Intel's earnings report seemed strange and a bit rash.
Yes, some of the non-tech earnings reports over the past few days have been less negative than feared, and in that sense viewed as "good news." However, if the Nasdaq is to sustain an advance we're going to need to see better-than-expected earnings and decent guidance from a wide cross-section of firms. And given the harsh nature of the recently completed preannouncement season, Briefing.com doesn't see much hope of that happening.
Consequently, much of the positive sentiment which has underpinned the 15% recovery rally is apt to fade away in the days to come as one tech company after another either misses its consensus estimate or, more likely, issues cautionary guidance. Intel was a perfect example of the potential trouble ahead as company's numbers came up short and it lowered expectations going forward.
While the lack of IT spending and difficult sector conditions isn't a new story, if it gets repeated often enough over the next two weeks it's sure to weigh on investor psychology, and at least stall the current recovery effort.
Initial support for the index can be found in the 1220-1215 range, with a secondary floor at 1191. A break below this secondary level (20-day moving average) would send a strong signal that the recent spike won't be any more meaningful in the end than all the other false starts over the past few years.
Robert Walberg
8:12PM Intel (INTC) 16.52 +1.42: Intel reported its third quarter results tonight, and regrettably, those results fell short in terms of convincing Briefing.com that Intel deserves the valuation it has been accorded or that the PC market is on the verge of enjoying a substantive pickup in demand. Accordingly, it is understandable that current indications suggest Intel, and the market, are poised to start tomorrow's session on a weak note. Where Intel and the market end up by the closing bell, however, may be an entirely different story.
As Briefing.com inferred in an earlier Story Stock, a number of blue chip companies are scheduled to report their results before the start of trading. Critical reports will be heard from several financial companies, and as we witnessed today, reassuring earnings news from the financial sector can be quite the motivating factor for investors that has them soon treating Intel's disappointment as a PC-specific story.
Whatever the case may be, Intel is apt to have its problems as its third quarter report, and fourth quarter outlook, don't exactly support the contention that Intel is a growth company. Granted, EPS growth of 10% isn't all that disappointing in a challenging environment; however, it is the company's top-line performance that gets to the heart of the matter. In Q3, revenues of $6.5 bln were flat with the yr-ago period. For Q4, typically a seasonally strong period, Intel is projecting revenues in the range of $6.5-6.9 bln. Again, not exactly a forecast indicative of a growth company considering Intel reported revenues of $6.98 bln in 4Q01, and yet, Intel trades at 31x est. FY02 earnings.
What's more is that even if Intel achieves the high-end of its Q4 revenue forecast, that will still leave its full-year revenues roughly flat with 2001-- and 2001 revenues were down 21% from 2000. In looking at the stock market, it is often said that the trend is your friend, but clearly, the revenue trend at Intel isn't friendly by any stretch of the imagination.
Understandably, there is a willingness to believe order will be restored to Intel's growth story in due time. When that is, though, is anyone's guess. It isn't likely to occur until there is a material pickup in demand in the PC market, and right now, there is little visibility into such a pickup in demand given the IT spending slowdown. That may be the case for some time, too, when one considers that PC penetration into homes and businesses has plateaued, that processor speed is no longer a key issue for most PC users, and that vicious price competition is a fact of life.
Those points are nothing new to Briefing.com readers as we have raised them in prior coverage of Intel. Unfortunately, Intel's Q3 report, and Q4 outlook, did little to alter our opinion that Intel is reminding investors with each passing earnings report that it should be viewed, and valued, more as a cyclical stock now than a growth stock given the maturation of its core market.-- Patrick J. O'Hare, Briefing.com
6:17PM After Hours Tuesday : The "this time is for real" vs "just another bear market rally" debate only got more heated after hours today. Intel missed its earnings estimate, guided Q4 lower, and cut capex spending, hardly the kind of report you would expect after a 5.1% Nasdaq rally. The result has been sharp declines in the after hours session, with the S&P 10 pts below fair value and the Nasdaq 100 after hours indicator off 31.
The market debate is keying off of Intel, since it was the catalyst for the after hours weakness. Was the Intel miss and guidance reduction indicative of larger problems? Or was it just another sign that the PC business remains lousy? Or both?
Clearly, no one can say that weakness in the PC market is a surprise. Even the magnitude of the Intel miss is not that shocking by the standards of recent quarters. But does this weakness tell us anything about conditions outside the PC market; does it suggest a weakening in consumer spending and the economy? Our answer is no. There are factors specific to the PC market at work here: the PC market is saturated in the US, replacement cycles are lengthening, and price competition is intense.
We are now likely to see a substantial market pullback after the huge gains of the past week, but there was nothing in the Intel report to suggest that this pullback will mark the end of the nascent rally. We would be far more interested in how well the financial sector sustains today's rally than the PC sector, as the financial sector is critical to the economic recovery; PCs and semis are not.
Most of the after hours carnage has been confined to the PC and semi sectors: INTC -12.4%, NVLS -9.5%, AMAT -7.5%, MSFT -3.4%.
6:49PM Teradyne tops Q3 EPS estimates; guides Q4 (TER) 9.90 +0.70: Reports Q3 (Sep) loss of $0.27 per share, excluding charges, $0.02 better than the Multex consensus of ($0.29); revenues rose 32.6% year/year to $330.7 mln vs the $333.6 mln consensus; sees Q4 (Dec) revenues of $310-340 mln (Multex consensus $348 mln) and EPS "loss of $0.22, plus or minus 3 cents." (Multex consensus loss of $0.23).
6:33PM Linear Tech meets Q1 expectations (LLTC) 24.38 +1.61: Reports Q1 (Sep) earnings of $0.17 per share, in line with the Multex consensus of $0.17; revenues rose 18.2% year/year to $142.0 mln vs the $140.9 mln consensus.
6:15PM Intel not claiming more visibility (INTC) 16.52 +1.42: -- Update -- On call, analyst suggests tighter revenue range for Q4 implies better visibility... Management says it is hard to claim it has more visibility and attributes tighter revenue range to fact that Q4 is less back-end loaded and is the most linear quarter of its year... INTC -2.13 at 14.39
6:10PM Intel hit wall in terms of cost savings (INTC) 16.52 +1.42: -- Update -- On call, says it is seeing a situation where it's just not seeing demand pick up and that it hit a wall in the way of cost savings, which was the biggest factor behind the disappointing margin performance in Q3... says margin improvement going forward will have a lot to do with demand... INTC -2.08 at 14.44
6:01PM Intel expects to bring inventories down some in Q4 (INTC) 16.52 +1.42: -- Update -- In Q&A portion of call, says it expects to bring inventory down a little bit in Q4, which should take some pressure off underutilization charges... INTC -1.99 at 14.53
5:53PM Intel (INTC) 16.52 +1.42: -- Update -- On call, management's prepared remarks pretty much follow text of press release... did note that corporate purchasing remained weak in Q3 in the mature markets of Europe and that Asia-Pacific region set new revenue record for quarter with China achieving 39% yr/yr revenue growth... INTC -1.91 at 14.61
5:49PM Maverick Tube beats Q3 consensus (MVK) 10.95 +1.83: Reports Q3 (Sep) earnings of $0.02 per share, $0.01 better than the Multex consensus of $0.01; revenues fell 16% year/year to $114.1 mln vs the $110.0 mln consensus.
5:25PM Nasdaq history of 5% losses : Lies, damned lies, and statistics: just to show that you can massage stats to tell any story, we would note in relation to the 17:07 comment that a similar story can be told with declines of 5% or more; there were only 4 such 1-day declines during the bull market but 20 during the bear market. So what does this all tell you? That volatility has been higher during the popping of the bubble than it was during the inflating of the bubble, which when you think about it isn't that surprising and probably tells you next to nothing about the future...bummer.
5:21PM Novellus expects Q4 bookings of $200 mln (NVLS) 26.13 +2.68: Update -- Says Q4 bookings, though, "could be 10% lower" than $200 mln forecast. That is balanced by comments that there are "glimmers of hope" even though "visibility is still unclear."... NVLS -2.65 at 23.48
5:12PM Harley-Davidson tops consensus by 8 cents (HDI) 53.00 +0.85: Reports Q3 (Sep) earnings of $0.54 per share, $0.08 better than the Multex consensus of $0.46; revenues rose 31.8% year/year to $1.14 bln vs the $1.04 bln consensus.
5:10PM Capital One beats by $0.14; reaffirms outlook (COF) 34.64 +2.48: Reports Q3 earnings of $1.13 per share, $0.14 better than the Multex consensus. Revs rose 8% to $2.6 bln (consensus $2.315 bln). COF maintains 2003 earnings of target of approx. $4.55 and reaffirms 2002 EPS growth target of 20%.
5:10PM Intel now trading at 14.44, off 2.08 from 4 pm close (INTC) 16.52 +1.42:
5:07PM Nasdaq history of 5% gains : Those making the bearish case have pointed out that during the Nasdaq's bull run from 1,200 to 5,000, there were only three days that saw gains of 5% or more in the composite index, while during the long bear market from 5,000 to 1,200, there have been 25 rallies of better than 5%. However, we would note that these rallies have become less frequent: 14 were in 2000, 7 in 2001, and today was just the 4th case of a 5% gain in 2002. Make of it what you will...
5:04PM Motorola matches earnings ests; falls short on revs (MOT) 10.10 Unch : Reports Q3 (Sep) earnings of $0.05 per share, in line with the Multex consensus of $0.05; revenues fell 11.9% year/year to $6.37 bln vs the $6.76 bln consensus.
4:52PM Novellus provides mixed Q4 guidance (NVLS) 26.13 -2.68: -- Update -- On call, says it expects Q4 EPS of $0.11 and revenues of $211 mln... Current Multex consensus estimates are $0.06 and $216.1 mln, respectively... NVLS -1.80 at 24.33
4:43PM Intel: CFO sees "soft demand in end mkts", Q4 PC demand at low end of forecast (INTC) 16.52 +1.42: -- Update --
4:37PM Nasdaq 100 after hours indicator -23 following Intel -11.5% :
4:32PM Intel's Q4 guidance (INTC) 16.52 +1.42: -- Update -- Using the midpoint of Intel's Q4 revenue guidance, we arrive at an EPS estimate of roughly $0.12; the current consensus is $0.16.
4:27PM Intel capex cut driven by construction savings (INTC) 16.52 +1.42: -- Update -- It's notable that Intel says the majority of its capex reduction is due to cost savings with ongoing construction projects; Intel noted on its last earnings conference call that it could drive capex savings through savings on construction projects, and that appears to be the case here. There is an important distinction between capex savings due to reduced investment in new semi equipment and due to construction savings. The news here is not as bad for semi equip cos as it appears at first glance.
4:22PM Intel guides Q4 revs below consensus, cuts 2002 capex & gross margin forecast (INTC) 16.52 1.42: -- Update -- Expects Q4 rev to be $6.5-$6.9 bln, vs consensus of $6.9 bln, and expects 2002 capex to be about $4.7 bln, lower than the previous expectation of between $5.0-$5.2 bln. Gross margin for 2002 is expected to be about 49%, near the low end of the previous expectation of 51%.
4:20PM Applied Micro beats by a penny (AMCC) 3.67 +0.29: Reports Q2 (Sep) loss of $0.04 per share, $0.01 better than the Multex consensus of ($0.05); revenues fell 26.8% year/year to $30.2 mln vs the $29.8 mln consensus.
4:19PM Intel misses by 2 cents (INTC) 16.52 +1.42: Reports Q3 (Sep) earnings of $0.11 per share, $0.02 worse than the Multex consensus of $0.13; revenues fell 0.6% year/year to $6.50 bln vs the $6.50 bln consensus.
4:18PM INTC trades off 4% following earnings; AMAT falls 4.7% in sympathy :
4:17PM Intel reports Q3 EPS of $0.11, below consensus (INTC) 16.52 +1.42: -- Update --
4:11PM NVLS trades off 2% to $25.57; AMAT fractionally lower :
4:10PM Novellus beats by 2 cents (NVLS) 26.13 2.68: Reports Q3 (Sep) earnings of $0.11 per share, $0.02 better than the Multex consensus of $0.09; revenues fell 24.1% year/year to $230.5 mln vs the $229.0 mln consensus. "The weak macroeconomic conditions and anemic demand have had a negative impact on our business in the second half of the year. Despite the economic malaise and resulting slowdown in demand from our customers, we remain committed to profitability and more importantly, generating cash from operations."
Close Dow +378.28 at 8255.68, S&P +39.82 at 881.26, Nasdaq +61.92 at 1282.44: The equity market rallied big-time today, driven by better than expected earnings news from several blue chip companies, an impressive showing by foreign markets, further short-covering activity, and an apparent asset allocation trade out of bonds and into stocks... The confluence of those factors led to a sharply higher open for the major indices that was accented by broad-based participation, heavy volume, and influential leadership from key groups like technology, retail, transportation, and financial...
The latter was a focal point throughout the day as a number of companies, such as Bank of America (BAC 65.75 +5.04), Citigroup (C 34.14 +3.83), Wells Fargo (WFC 49.78 +2.55), and Fannie Mae (FNM 70.98 +4.50), checked in with reassuring earnings news... That set the stage for a bullish open from which the market would never look back... Within the first few minutes of trading, in fact, the major indices were all up at least 3.0%... Strikingly, both the S&P 500 and the Nasdaq closed above their 50-day simple moving average-- an area that has provided stern resistance for some time now...
They did so, helped by a late wave of buying interest that left the indices at their best levels of the session... The few laggards of note were mostly groups that have typically been thought of as safe-havens (i.e. gold, beverage, household products, and defense)... The utility sector, a former safe-haven area, suffered further losses today amid concerns of a credit crunch in the U.S. electric power industry... As good a day as it was for the equity market, though, it was just as dismal for the Treasury market... Losses in that arena were quite substantive with the 30-yr bond and 10-yr note each falling more than 2 points...
The yield on the latter is at 4.04% now-- nearly 50 basis points higher from where it was trading when the S&P hit a multi-year low last Thursday; meanwhile the 30-yr bond is just 2 basis points away from sporting a 5-handle... Separately, if the initial reaction to Intel's (INTC 15.17 -1.35 after hours) Q3 report is any indication, the stock market, and the semiconductor sector specifically, will be hard-pressed to have as good a day tomorrow... Intel posted a profit of $0.11 per share, which was two cents shy of the Multex consensus estimate...DJTA +6.9%, DJUA -0.5%, Nasdaq 100 +5.5%, Russell 2000 +4.0%, SOX +9.4%, S&P Midcap 400 +4.0%, NYSE Adv/Dec 2471/839, Nasdaq Adv/Dec 2526/826
3:07PM Nasdaq's Big Hurdle : since bottoming at 1108 on 10/10, the Nasdaq has surged nearly 15%. Gains have come amid increased volume and expanding breadth - both positive signs. However, before investors get overly excited about the current recovery attempt, the Nasdaq must clear a big hurdle - its 50-day moving average.
For the better part of this calendar year, the Nasdaq's 50-day moving average has capped all rally tries. The index has managed to eke above this barrier on occasion, but penetrations have been minimal and very short-lived - the last occurring in mid-August, just before the next big decline.
As Briefing.com noted in an earlier Story Stock, the Nasdaq's 50-day moving average came in at 1268 in today's session. With today's gain of 49 points, the index is currently sitting at 1269, or virtually on top of this key technical level. Given the scope and speed of the market's advance, this would appear to be a natural point for some corrective activity. Consequently, don't be surprised if the index starts to relinquish some ground into the close. Tomorrow's session could also prove challenging, especially if the earnings news gives traders a reason to take profits.
Several key tech companies are also challenging their 50-day moving averages. How these stocks respond to the test will speak volumes about the integrity of the current advance. Listed in the table below are several issues worth monitoring. If the recovery effort is to have legs, then these high profile issues need to break and then hold above their respective 50-day moving averages.
Stock Price/Change 50-Day M.A.
Applied Materials (AMAT) 12.89, +0.89 12.94
Broadcom (BRCM) 13.25, +1.59 15.02
Cisco (CSCO) 10.94, +0.95 12.44
IBM (IBM) 67.80, +4.38 69.51
Intel (INTC) 16.15, +1.05 16.15
KLA-Tencor (KLAC) 31.39, +2.01 32.23
Novellus (NVLS) 25.38, +1.93 24.16
QLogic (QLGC) 26.00, +3.77 31.15
Siebel Systems (SEBL) 7.03, +0.14 7.78
Veritas (VRTS) 15.38 +1.06 16.23
Should also note that the DJIA (8179.88 +302.48) and the S&P 500 (873.25 +31.81) are also fast approaching their 50-day moving averages of 8280 and 877. -- Robert Walberg, Briefing.com
12:24PM Symantec (SYMC) 38.00 +2.46: This is a stock we continue to like on both a fundamental, and a technical, basis. The company will release its second quarter results tomorrow, October 16th, after the market close. Analysts are looking for the company to report earnings of $0.31 per share and Symantec has exceeded estimates in each of its prior thirteen quarters.
As far as what the company does, the chances are relatively good that you have Symantec's antivirus software on your computer. The company's Norton AntiVirus 2001 and Norton SystemWorks 2001 are the number two and five top-selling software products respectively (according to PC Data). The two products give Symantec a reliable base of business to support its effort to take the company in a new direction.
Namely, the company intends to create the industry's first fully interoperable, centrally managed security platform. To this end, the company has acquired Axent Technologies which provides two important technologies -- enterprise-class intrusion detection and vulnerability assessment. Unlike the vast majority of businesses, Symantec's near-term visibility has been enhanced by its deferred revenues which rose 18% sequentially in the June quarter to $391 million.
In terms of near-term risk, note that in mid-July Symantec acquired three privately held businesses for an aggregate purchase price of $355 million (roughly 10% of Symantec's current market value). While some may contend these present an integration risk, we believe the aggregate size of the acquisitions is not substantial enough to warrant the level of concern raised by others. In addition, management has stated that new acquisitions are unlikely until the integration of this Summer's deals is complete.
Looking at the current quarter, the company's CEO has already said its consumer business is tracking ahead of expectations for the quarter and will likely exceed fiscal 2003 guidance. At the same time, its enterprise business is said to be tracking in line with expectations.
Now from a technical perspective, it's worth noting that yesterday the shares cleanly cleared notable resistance at their 200-day simple moving average of 34.66. On an intermediate-term time frame, look for subsequent resistance at prior congestion around 40.00 followed by more significant overhead in the area of 42.50. To the downside, look for initial support at 35.00 which matches up with an area of notable prior congestion followed by its 200-day simple moving average of 34.66. Symantec has been on Briefing.com's Value Core Holding List since December 29, 2000 at a split-adjusted price of 16.69. -- Mike Ashbaugh, Briefing.com
11:11AM Citigroup (C) 33.02 +2.71 (+8.94%) Citigroup's earnings report, and the earnings from other financial services companies is the best news for this market in a long, long time. The financial services sector, along with healthcare, is still our pick for the sectors to lead the overall market out of this two-year plus bear market, so the signs of health are encouraging. Although the great dream of uniting all financial services under one roof, which was the impetus behind the acquisition of Traveler's years ago, has never come true, Citigroup is still one of the country's most significant financial companies.
A look at the income statement for this quarter gives a clue as to why emergence from a recession provides opportunities for great investments. Overall, Citigroup revenue rose 10%, but expenses declined 2%. During a downturn, companies lay-off excess people and trim less profitable business. They basically go on a diet. As the economy recovers, the slimmer companies can perform more efficiently, be more profitable. That's what you are seeing in Citigroup's earnings.
As an indicator for the rest of the financial sector, Citigroup's report is very positive. Frankly, while the stock price and sentiment surrounding most financial services companies has been extremely negative, the actual impact has not been that bad. Merrill Lynch still made $634 million last quarter and is projected to make $0.58 a share this quarter, or $557 million.
There was a huge outcry about how awful the financial services industry suffered during this bear market, but it is now starting to look like pretty minimal, from a long term perspective. (These guys just like to complain loudly when they are forced to order the petite filet mignon instead of the 24 ounce porterhouse.)
Merrill Lynch (MER) reports before the open tomorrow, on Wednesday. On the basis of Citigroup's strong report, expectations of Merrill Lynch exceeding estimates are likely to rise, as shown by the increase in its price today (up 5.5%). If Merrill beats estimates tomorrow, the strength of Citigroup and Merrill will be seen as a strong signal for the entire financial sector. Buying Merrill going into tomorrow's earnings report is a possible short term play here, despite the fact that many others are also doing it today.
There is a lot of negative press surrounding Citigroup right now - loans to Bernie Ebbers and the complaint from New York State Common Retirement Fund Controller Carl McCall are just the most recent, the investigation into Salomon Smith Barney investment banking analysts are another - but all of that really doesn't add up to a business problem. It is bad press, and perhaps embarrassing, but after it blows over, the income statement for Citigroup is not going to be impacted by Eliot Spitzer or Carl McCall. It just isn't a problem of magnitude. Ignore those issues - focus on the income statements.
One item in Citigroup's report that deserves mention: increased reserves for bad debt, particularly in the consumer sector. The implication is a tightening of credit standards going forward. If this is indicative of the overall credit environment, it serves as distant-early-warning type signal. A credit crunch would put the brakes on any economic recovery - and should be seen as a possible problem. However, for now, this is more like the little light on your dashboard "Service engine soon." It probably means little right now, but should be watched.
Overall, however, this extremely positive report from Citigroup is a significant release for the overall market - the importance of it should not be overlooked. When the financial markets are healthy, the rest of the economy also benefits. Citigroup's report is very healthy - and a good sign for the rest of the financial industry. - Robert V. Green
10:18AM Technical Levels: In a piece written last week, we addressed the issue of whether Thursday's rally might represent the beginning of a meaningful move higher. In retrospect, it's clear now that the move did represent a tradeable bounce at the very least -- as of yesterday's close, the Nasdaq had pushed 10.8% off its worst levels. Based on this morning's open, the index was higher by 13.7%.
Yet the entire question of whether the market may have bottomed seems to offend many. On the one hand, this is likely a reflection of the extremely poor market sentiment in the current environment. Yet it also represents a sense among many that it's simply 'beyond the point' whether or not the markets have finally carved out a bottom.
We won't comment further on the qualitative issue of whether it matters that the market has bottomed. What we will do, however, is put forward an interesting graphic of what happened after the markets put in their last 'real' bottom. At a minimum, it helps explain why traders attempt to 'pick' the bottom in the first place. Yet it also helps to explain the magnitude of this morning's opening gains.
The chart above illustrates the Nasdaq's September 2001 collapse and subsequent recovery. Without making things complicated, the obvious take away is that from bottom to top the index approached a 50% gain in a matter of roughly ten weeks. A second important point is that even if you missed the first few 'huge' days, the lion's share of the gains were still on the table.
Now looking forward we've been harping on the fact that early November is seasonally a standard entry point for stocks. With the markets still in the general vicinity of five or six year lows, the chances are that the indices have room here for a sizeable move. Just keep in mind at this point that the 'early November' entry point most likely occurred last Thursday.
From current levels, the story is very simple today from a technical perspective. Continue to look for notable resistance at the Nasdaq's 50-day simple moving average of 1,268. This is an area we pointed to yesterday and also appears to be a pivot point in the early going today. -- Mike Ashbaugh, Briefing.com
3:26PM Cisco Systems (CSCO) 10.86 +0.87: Stock adds to 5 straight days of gains as investors turn to heavily sold tech names; defensive note from Salomon Smith Barney also contributes to buying interest. Firm rejects fears CSCO could miss numbers (following a round of analyst estimate cuts in late Sept/early Oct) and assesses the downside risk as "relatively modest:" does not expect operating margins to be significantly pressured and estimates it would takes a 10% decline in revenues (or a 250-300 BP decline in margins) if revenues hold steady to reduce quarterly EPS by $0.01 per share .. Salomon believes CSCO can moderate a considerable decline in orders by widening the B-B and maintains their Outperform rating and $15 price target.
2:10PM Semis : Citing sluggish intl economic growth, a lack of pricing power, and reasonably high levels of technology product saturation, Morgan Stanley cuts their global semi industry revenue growth forecast for 2003 to 10-15% from 15-20%. Firm acknowledges slightly positive growth in end-demand mkt demand (tech food chains are displaying modestly positive seasonality in Q3) but expects revenue growth in Q4 to be slower than Q3 (with Q3 growth projected 3-5% q/q) ... Morgan Stanley recommends overweighting wireless IC cos vs. PC-based suppliers due to growth driven by the replacement cycle and growth in semi content, owing to the migration to 2.5G and camera phones,.
1:56PM IBM (IBM) 67.25 +4.08: Banc of America Sec reiterates Buy rating and price target of $90 in anticipation of tomorrow's Q302 earnings; looks for company to meet or beat firm's below consensus estimates of revenues of $19.3 bln (vs. Multex consensus of $19.8 bln) and EPS of $0.92 (vs. Multex consensus of $0.96); firm is encouraged by IBM's small relative exposure to hard-hit consulting sector and improving hardware margins; estimates acquisition of PricewaterhouseCoopers should add roughly $4 bln of annual revenues and will be slightly dilutive in first year, despite higher reported Services margins. Shares are up 6.4% in today's session, outperforming Dow Jones Industrial Average, currently 3.8% up.
1:34PM Bear Market Rally? : CSFB believes the recent upswing could be the start of another bear market rally and expects a short-term peak of 930 (S&P 500) or 12% upside. Firm would encourage strong purchase of equities if they saw clear 'capitulation' combined with at least one of the following factors: (a) US corporates being clear net buyers, (b) more obvious under-valuation: firm's fair value range is 17-19x trend earnings (860 to 960 on the S&P 500), suggesting the US is only moderately undervalued, and (c) appropriate intl response. CSFB adds that their indicators are less transparent than they were when CSFB upgraded their equity weighting on July 16 and on Sept 21 2001.
11:56AM Silicon Labs (SLAB) 24.08 +0.98: SLAB currently rising 4.2%, despite lackluster comments... Legg Mason initiated with a Hold. Firm views favorably SLAB's solid financials and the fact that it was able to return to profitability shortly after the industry's downturn began, while the majority of its peers are still posting losses; notes that, today, SLAB is cash flow- positive, has healthy cash position, and only $2.5 mln in long-term debt. Firm's primary caution stem from the volume of emerging competition in the Direct Conversion Radio market, continual shift of handset manufacturers to complete turn-key system level solutions to the potential exclusion of companies such as SLAB who provide only a portion of the puzzle, and company's premium valuation as compared to its most direct peers.
11:48AM Intersil (ISIL) 16.37 +1.57: Stock trading up 10% after positive analyst comments... Legg Mason initiated with a Buy rating and price target of $24. Firm says ISIL's broad portfolio allows it to focus on becoming a complete integrated systems solution provider, and in long-run, these complete solutions should allow company to continue to increase its silicon per system, as well as its gross margins, and further raise the barriers to competition.
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