From Briefing.com: Updated: 30-Jan-03 - General Commentary - Market shrugged off the President's bellicose State of the Union speech and pressed higher, posting its second straight gain. Ability to advance in the face of what appears to be an imminent war with Iraq suggests that investors have discounted the risks of war - at least based on widespread belief that any military engagement will be brief and successful. If true, then focus will shift back to basic fundamentals.
Unfortunately, news there not too promising either. IT spending remains very tight, as companies don't foresee a significant pick up in demand. Consequently, theme of the next few months likely to mirror that of the last few - improve operating efficiencies. Put another way - get leaner
Getting leaner means cutting, not increasing, staffing and capital spending budgets. Tight cost controls might help companies meet bottom-line numbers, but top-line growth should remain relatively anemic.
Before sector is ready to take flight, need to see an actual improvement in end-user demand. Until such evidence is plentiful, sector more likely to break to the downside than to the upside. Confronted with that reality, Briefing.com continues to recommend underweighting techs.
While networking, telecom, wireless and internet services groups have exhibited impressive relative strength over the past couple of months, Briefing.com contends that best bet in sector right now remains the software group. It's one of the few spots where we are seeing an actual improvement in IT spending and several of the second and third tier stocks are trending firmly higher off October lows.
Valuations still a bit rich in most cases, so would be more inclined to use pullbacks to add to any positions than to chase current prices. Nevertheless, Briefing.com still sees software and, to a lessor degree, semiconductors as best opportunities for intermediate- to long-term outperformance.
Robert Walberg, Briefing.com
5:25PM Asyst misses Q3 consensus; sees Q4 revs up (ASYT) 9.30 +0.57: Reports Q3 (Dec) loss of $0.38 per share, pro forma, $0.11 worse than the Multex consensus of ($0.27); revenues rose 112.4% year/year to $75.6 mln vs the $72.7 mln consensus; sees Q4 (Mar) revs of about $75 mln (Multex estimate $68.1 mln).
4:56PM ESS Tech posts in-line Q4; guides Q1 lower (ESST) 5.79 -0.15: Reports Q4 (Dec) earnings of $0.03 per share, in line with the Multex consensus of $0.03; revenues fell 43% year/year to $47.5 mln vs the $45.5 mln consensus; for Q1, sees pro forma loss per diluted share in range of $0.01-0.07 (Multex consensus $0.02 profit).
4:52PM Amkor beats by $0.08 (AMKR) 4.93 +0.13: Reports Q4 (Dec) loss of $0.15 per share, $0.08 better than the Multex consensus of ($0.23); revenues rose 21.0% year/year to $426.3 mln vs the $423.1 mln consensus.
4:21PM Newport beats by $0.02 on light revenues (NEWP) 12.58 +0.15: Reports Q4 (Dec) loss of $0.11 per share, $0.02 better than the Multex consensus of ($0.13); revenues fell 25.5% year/year to $32.4 mln vs the $34.3 mln consensus.
4:09PM Micrel beats by a penny (MCRL) 9.02 +0.33: Reports Q4 (Dec) loss of $0.01 per share, $0.01 better than the Multex consensus of ($0.02); revenues rose 7.7% year/year to $50.6 mln vs the $50.7 mln consensus.
4:08PM Foundry Ntwks beats by a penny (FDRY) 9.65 +0.17: Reports Q4 (Dec) earnings of $0.08 per share, $0.01 better than the Multex consensus of $0.07; revenues rose 32.6% year/year to $86.7 mln vs the $85.3 mln consensus.
4:04PM Maxim Integrated reports in line (MXIM) 33.35 +1.28: Reports Q2 (Dec) earnings of $0.23 per share, in line with the Multex consensus of $0.23; revenues rose 15.8% year/year to $286.1 mln vs the $287.2 mln consensus.
3:36PM Rambus upgraded to Buy from Hold at AmTech Research (RMBS) 11.34 +3.90: -- Update --
1:24PM RMBS +35% takes over top spot on percentage gainers list 10.06 +2.62: Issue has seen an explosion in volume in reaction to reports of favorable court ruling (see 12:55 comment). Stock has now traded 6.5 mln shares (avg 0.94 mln).
12:55PM Rambus receives favorable patent dispute ruling (RMBS) 8.20 +0.76: Traders citing Bloomberg say that a U.S. appeals court ruled in favor of RMBS and threw out the jury's finding that the co committed fraud while pursuing patents for its chips; court also revived RMBS's patent infringement claim against IFX.
2:24PM Broadcom lower on talk that another exec departs (BRCM) 13.75 -0.56: Stock a notable laggard in today's action. Weakness has been attributed, in part, to talk that co's IR director is leaving the company. If true, this would represent the second departure of a high profile figure at BRCM in less than a week. On Jan 23, co announced the resignation of its CEO, citing "serious family matters."
1:54PM Transmeta higher on reports of HP deal (TMTA) 1.41 +0.22: According to Pacific Growth, it has been reported, but not announced, that TMTA has won HP's second tablet PC and EliteGroups DeskNote laptop. Pacific Growth says it is looking to confirm this report with the company. If confirmed, announcements would drive firm's model closer to company guidance and Q4 profitability. (volume today is 1.47 mln vs avg turnover of 0.55 mln).
11:07AM Novellus (NVLS) 30.39 +0.86: Merrill Lynch upgrades Neutral to BUY. Target $40. Reflects attractive valuations and the impact of improving outlook driven by co's high exposure to leading edge technology.
10:53AM Celestica (CLS) 11.85 -2.89: Prudential downgrades Buy to HOLD. Target $16 to $13. Cites management's weak 1Q guidance, due to seasonality, continued weak end markets and overhanging cost issues in Europe.
10:39AM Celestica (CLS) 11.87 -2.87: UBS Warburg upgrades Reduce to NEUTRAL. Target $14 to $13.5. Cites 15% decline in shares since 1/13; expects to see selling pressure as investors assimilate the information from the earnings call.
9:37AM Celestica (CLS) 11.50 -3.24: Bear Stearns downgrades Peer Perform to UNDERPERFORM . Target $16 to $10. Cites weak Q402 results, gross margin declines, concerns over server mix and share shifts, and valuation.
10:37AM Coherent (COHR) 19.40 +1.93: UBS Warburg upgrades Neutral to BUY. Target $24. Cites valuation.
10:36AM Applied Materials (AMAT) 13.48 +0.24: UBS Warburg upgrades Neutral to BUY. Based on valuation.
9:07AM United Micro beats by $0.01 (UMC) 3.10: Reports Q4 (Dec) earnings of $0.01 per share, $0.01 better than the Multex consensus of $0.00; revenues rose 25.8% year/year to $504.3 mln vs the $506.2 mln consensus.
8:53AM Bear reading ticks lower : We're hearing from trading floors that the weekly Investor's Intelligence survey reveals bulls holding at 50% for a third straight week, with bears falling to 26.1% from 28.3% last week, more than reversing the prior week's uptick. We have not seen the report and cannot confirm the numbers.
8:52AM Micron estimates revised at Deutsche (MU) 7.94: -- Update -- Deutsche Securities cuts their FY03 est to ($2.25) from ($1.53), vs consensus of ($1.34), due to their lower DRAM avg selling price forecast; firm also raises their FY04 est to ($1.05) from ($1.22) due to lower revs and lower costs; on the basis of these revisions, firm believes MU's cash balance will reach critically low levels by fiscal Q4, implying the need for capital raising in the next 1-2 quarters (note that MU announced this morning a $500 mln convertible offering). However, firm believes that est cuts could be a catalyst for mkt expectations reaching a trough, and says their bias on their Hold rating is becoming more positive. Target is $13.
8:41AM Micron announces $500 mln convertible notes offering (MU) 7.94:
8:03AM Celestica cut to Underperform at Bear Stearns; target $10 (CLS) 14.74: Bear Stearns downgrades to Underperform from Peer Perform after the co missed consensus last night; firm also cites gross margin declines, concerns over server mix and share shifts, and valuation.
In the news: Some strength has been noted in tech today with Applied Materials (AMAT close 13.24, +2%) higher in the wake of an upgrade based on valuation. Initial resistance is in the 13.50/13.55 area with a secondary ceiling at 13.75/13.80. Supports are at 13.34 and 13.22 with a breach here inflicting some damage to the recovery mode. Also higher in this sector is Novellus (NVLS close 29.53, +2.4%). The company reported earnings last night and was upgraded this morning by Merrill Lynch. However, UBS did cut estimates for CY03 and CY04. Resistance is at 30.54 and the 30.95/31.09 area (20/50 day ema). Support is between 29.80 and 29.50.
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