briefing.com info:
07:22 ET Business Week stocks : Some pros believe that AAPL will move higher this month, and one says "any uptick in sales will catapult the stock back to the mid-20s"... some investors are excited by MVIS's miniaturized optical scanning-and-imaging technology, and sources say they are close to a deal with Canon... the FDA is expected to announce that DNDN may speed up its Phase 3 clinical trials on its prostate cancer drug Provenge, which would expedite its application for final approval.
07:19 ET IBM downgraded to In-Line by Solly on valuation (IBM) 83.06:
07:16 ET Sealed Air Announces Approvals of Agreement in Principle (SEE) 35.72 -0.52: Announces the company's Board of Directors has approved the terms of the previously announced agreement in principle with the Committee of Asbestos Personal Injury Claimants and the Committee of Asbestos Property Damage Claimants in the W.R. Grace bankruptcy proceeding.
07:11 ET Rational Sftwr acquired by IBM (RATL) 8.17: Announces the two companies have entered into a definitive agreement for IBM to acquire the equity of Rational at a price of approximately $2.1 billion in cash or $10.50 per share.
07:05 ET UAL Corp may begin bankruptcy proceedings as early as Sunday (UAL) 1.00: The Wall Street Journal reports that UAL directors meet Saturday and may decide to begin bankruptcy proceedings as early as Sunday or Monday; airline is close to reaching agreement with its banks on a $1.5 bln financing package that would allow it to continue flying after filing under Chapter 11.
07:02 ET Martha Stewart shares accumulated by Rocker Partners - WSJ (MSO) 10.89: The Wall Street Journal's "Heard on the Street" column reports that hedge fund Rocker Partners, which has built a reputation as a successful contrarian investor that looks for overpriced stocks and then shorts them, has accumulated control of about 7% of MSO; Rocker is attracted to the co's $3.50 per share in cash as well as its core franchise, and assumes the worst of Ms Stewarts legal troubles is over.
Tech Stock Analysis
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Updated: 06-Dec-02
General Commentary
Nasdaq lost ground for the third consecutive session, its longest losing streak since mid-November. Though the decline has been relatively modest and certainly orderly, investors have to be getting a little spooked by the sector's behavior of late - especially knowing how quickly advances have given way to new lows in the past.
While Briefing.com isn't anticipating another sizable decline, it does expect the sector/market to have a much rougher time posting gains in the days and weeks ahead. Valuations are rich, worldwide economic growth remains sluggish, war with Iraq is still possible, if not probable and technicals are seriously overextended.
Countering these negative forces are the favorable seasonal bias, sector's strong momentum and growing perception that techs have finally hit bottom and are in process of turning the corner, albeit slowly. These influences should limit the downside risk over the near-term.
Given the countervailing forces at work in the sector/market at the moment, traders should expect volatile, but generally range bound trading to extend into early next year. We put the bottom of the range in the 1340-1320 area, with the top near 1520. A nominal new high is possible, considering momentum and seasonals, but a repeat of the strength seen last month is highly unlikely.
Whether the Nasdaq ultimately breaks out to the upside or downside of this range will depend largely on how Q4 earnings shape up and what companies say about visibility into early CY03. Much of the recent advance has been predicated on assumption that end-user demand will finally show material improvement next year.
If those assumptions prove prescient, then the Nasdaq will have no trouble building on the Oct-Nov advance. On the other hand, if another quarter goes by with no sign of such improvement, just as it's moving into a less favorable seasonal period, then the ensuing correction could be harsh.
Unfortunately, early signals are mixed. Though a number of firms have reaffirmed guidance (rather than lowering it), we're still getting comments like those made by Corning yesterday in which management forecasted no change in the telecom sector until late 2004.
Based on how far the sector has rallied in recent weeks and on the limited earnings visibility going forward, Briefing.com still thinks that investors would be wise to take a cautionary approach to the sector at this time.
Robert Walberg
Industry Briefs
Computer Systems & Peripherals | Networking | Internet | Semiconductor | Semi Equipment | Software | Telecom Equip | Telecom Services
Computer Systems & Peripherals
Gateway (GTW) 3.42 -0.70: CEO Ted Waitt warned that the low end of the range is the best-case scenario for GTW in Q4. GTW guided to a loss of $0.10-0.13 with its last earnings report.
Western Digital (WDC) 7.30 -0.47: In an 8-K filing this morning, WDC provides an update on industry conditions; company says that pricing has been better than expected, demand from OEM customers was strong, and expectations for a linear quarter on track. Company doesn't formally raise guidance, but notes that "conditions in December will determine its ability to exceed guidance for the quarter."
Networking
Cisco Systems (CSCO) 14.11 -0.32: An article posted on Byte & Switch yesterday (the storage publication of Light Reading) reports that Reliant Energy is very impressed with its beta test of Cisco's new fibre channel switch, and may even switch over to Cisco entirely; Reliant currently uses MCDT and BRCD switches. The article says that CSCO will begin shipping the switches before year-end.
Internet
Allscripts (MDRX) 2.19 unch: Raymond James upgrades to speculative Outperform from Mkt Perform based on valuation; firm notes that at a price of $2.20 the shares are barely above cash at $1.72 per share, and 2003 enterprise value/sales ratio is 0.19, which is lower than every other stock in firm's coverage universe; says co has beat firm's ests 4 qtrs in a row and has been slowly building customer base. Price target is $3.
Amazon.com (AMZN) 22.58 -0.81: Stock under pressure due to negative note out from a research firm called Horizon Research that questions AMZN's free cash flow in the most recent quarter. The Horizon Research note doesn't offer much in the way of new information; it primarily repeats the well known bearish case against AMZN, while questioning the leverage in the AMZN business model.
eSpeed (ESPD) 14.40 -1.08: The Financial Times reports that the New York Mercantile Exchange has received a boost in its dispute with Cantor Fitzgerald's subsidiary ESPD over electronic trading after a court ruled that a 32-year-old document could be used as evidence to invalidate ESPD's patent.
Overture Services (OVER) 27.82 +2.32: CNN announces that it has selected OVER as its exclusive commercial search provider for CNN.com, CNNSI.com, and CNNMoney.com.
RealNetworks (RNWK) 3.80 -0.13: The Wall Street Journal reports that RNWK can expect fresh challenges in its bid to build a service akin to a cable franchise on the Internet, as consumers may find it hard to stomach subscribing to both RNWK's new Starz on Demand movie service internet offering as well the Starz movie channels on cable or satellite, especially as competing movie services launch on the Internet.
Symantec (SYMC) 41.40 -1.02: UBS Warburg initiates with Hold and price target of $43, believing SYMC should benefit from seasonally strong fiscal Q3 (Dec) and Q4 (Mar); however, believes seasonal strength is largely reflected in current stock price.
Semiconductor
Advanced Micro (AMD) 8.25 +0.40: Company guides Q4 revenues up to $700 mln vs the Multex consensus of $600 mln; cites stronger than expected PC processor demand and continuing strength in flash memory.
Fairchild Semi (FCS) 12.75 -0.28: Noting strong turns business, company guides Q4 revenues up to flat to -3% vs prior guidance of down 4-6%; however, also noted limited visibility into Q1 and says revenues will fall in Q1 vs consensus expectation of a small increase... Investec downgrades to HOLD from Buy in belief that commodity suppliers are getting squeezed on pricing and seeing downside to gross margins and risk to EPS.
Intel (INTC) 18.96 -0.78: After close, co expects Q4 rev to be $6.8-$7.0 bln, vs previous range of $6.5-$6.9 bln; gross margin is expected to be at the low end of the previous range of 49%-51%, plus or minus a couple of points; gains or losses from equity investments and interest and other are expected to be a net loss of $90 mln, vs previous expectation of a net loss of $50 mln, primarily due to higher impairment charges on equity investments. All other expectations are unchanged.
STMicroelectronics (STM) 23.23 -0.55: Deutsche Securities downgrades to SELL from Hold on recent price appreciation.
Semi Equipment
Dupont Photomask (DPMI) 23.89 -1.46: Merrill Lynch downgrades to SELL from Neutral. Cites lower estimates, slow return to profitability, recent stock run-up.
Software
Computer Associates (CA) 14.52 -0.73: Company intends to sell $400 mln in convertible notes due 2009.
EDS (EDS) 16.89 -0.18: Morgan Stanley says they have reviewed the Navy Marine Corps Intranet customer satisfaction surveys, and the data reinforced their view that EDS faces substantial execution issues on the NMCI contract that could pressure cash flow into early 2004; cuts 2003 est to $1.95 from $2.13 (below consensus of $2.11) based on higher-than-expected pension cost and higher net interest cost.
Internet Security (ISSX) 22.61 -1.00: We are hearing trader talk that ISSX said on a conference call hosted by AG Edwards that they still have over 50% left to go in the Dec quarter to make numbers, which we are told could indicate they are not doing as well as expected. (Note that Briefing.com was not listening to the call, and cannot confirm this.)
Manugistics (MANU) 2.47 -0.21: Soundview downgrades to Neutral from Outperform and cuts price target to $3 from $7, saying there are no signs of a bottom in license rev; also, the co must increasingly grapple with challenged financial condition and some leveling of the competitive playing field; cuts FY03-04 rev/EPS ests to below consensus.
Mercury Interactive (MERQ) 30.55 -0.33: We are hearing from traders citing Bloomberg that MERQ's CEO said during an interview that he sees flat computer spending in 2003, but still expects sales growth.
Telecom Equip
Corning (GLW) 3.95 -0.28: In announcing specifics of upcoming goodwill charges, GLW notes that it does not anticipate any significant growth in the telecommunications segment until late 2004.
Garmin (GRMN) 24.16 -0.56: Morgan Stanley downgrades to EQUAL-WEIGHT from Overweight rating and price target of $27 on valuation, but thinks meaningful upside exists for long-term holders... Needham & Co initiates with Buy and price target of $31. Cites near-term growth driven by recent product introductions; longer-term opportunities exit in aviation "future cockpit" and a possible automotive OEM deal.
Telecom Services
BellSouth (BLS) 26.90 -0.41: Credit Lyonnais Sec initiates coverage with Add rating and price target of $30 due to strong cash flow, solid balance sheet, and possibility of dividend increase.
France Telecom (FTE) 19.03 +2.59: French government announced a rescue plan for the debt-laden telecom; a $9 bln refinancing package and internal restructuring are at the heart of the bailout.
Verizon (VZ) 39.07 -0.85: Reaffirms their 2002 forecast of $3.05-$3.09, and announces that they will expense stock options; co also says that current conditions in the securities markets will cause the co to lower its expected return on plan assets and discount rate assumption for 2003, but does not foresee a need to add funding to their pension plans overall.
Vodafone PLC (VOD) 18.79 -0.16: CSFB downgrades to NEUTRAL from Outperform due to shares being fairly valued. |
