Storage . . . Maxtor estimates and price target raised to $18 at Hoefer & Arnett (. Firm believes believe the expected economic growth in 2004 and the strong end to this year coupled with Maxtor's growing sales of enterprise drives, PVRs, and increased shipments to Dell should boost the firm's bottom line. The analyst notes that Maxtor is now well positioned in the enterprise space with a 15k product; believes the significance of the 15k opportunity is compelling given current forecasts suggesting it will exhibit the strongest growth of any enterprise segment over the next two years. For this year, the firm has the co earning $0.81 per diluted share, up from its previous $0.74 per diluted share. For 2004, the firm is estimating $1.00 per share, up from its previous $0.82 per share.
Concurrent chosen by Cox to deliver a full suite of Video-On-Demand applications in an upcoming market launch of VOD. This launch will be the fifth Cox system to provide VOD to its customers using Concurrent's MediaHaw platform.
American Tech Research starts Emulex, Finisar, Qlogic with Buy ratings. Firm views Finisar as the most attractive storage component vendor given their belief that the worst is behind it and early signs of a turn around are emerging. Also, firm thinks the company's conservative Oct quarter guidance of flat EPS and revs are likely to be exceeded, and note that the stock trades at a 50% discount on P/S vs peer JDS Uniphase; target is $6. Firm says QLGC is the strongest player in the space with the richest list of customers, and says that while ELX's acquisition of Vixel may be viewed as a short term negative, in the long-term it should make a lot of strategic sense, 12-18 months out.
Network Equipment . . . Tellabs reported a net loss of $65 million, or 16 cents a share, narrower than the loss of 22 cents recorded in the year-earlier period. Excluding non-recurring items, such as restructuring charges, the loss was 4 cents a share, vs. the average analyst loss estimate compiled of 6 cents a share, as the networking services company exceeded its goal of cutting operating expenses. Revenue fell 15 percent to $244.5 million, but exceeded analyst forecasts of $238.4 million.
Proxim to provide its ORiNOCO Access Points to Hughes Network Systems.
Semiconductor Equipment . . . Novellus upped to Buy from Hold with a price target increased to $42 from $40 at Berean Capital. The firm believes the following: the semiconductor capital equipment industry is on the cusp of a secular growth, the stock has some upside and will be buoyed by industry outlook and playing to expectations based on the bookings growth and a P/B for NVLS of 2.75x versus its peers at 3.2x, the industry outlook for bookings is positive and should provide earnings and top line momentum. The analyst notes the 4th quarter order swing to 5-10% was due to a last minute $10-12 million order from MU for Sabre tools and SMIC jumping in and ordering 300mm tools.
Semiconductors . . . Transmeta announced that a number of computer companies, including Hewlett-Packard and Sharp, have endorsed Efficeon, its next-generation x86-compatible microprocessor. Transmeta said it's made "major innovations in its proven hardware and software architecture," creating opportunities for PC system and software vendor partners to develop innovative form factors. As reported in the New York Times, Transmeta described an unusual software technique that could lead to less "leakage" of current in tiny transistors, something that could help solve a problem that's long bedeviled the semiconductor industry.
Intel's strong 3rd quarter results and solid 4th quarter guidance validate favorable view on the stock as highlighted in earnings preview on 10/13. Intel benefited from stronger-than-seasonal strength in the PC market, with particular strength in emerging markets, share gains in microprocessors and chipsets, and some corporate pickup. Guidance for 4th quarter is solid in light of the exceptionally strong base in 3rd quarter. As analysts had already anticipated much of this strength in Intel's business, so analysts are only fine tuning estimates. Analystsa are raising 4th quarter revenue estimate from $8.50 billion to $8.55 billion, above the $8.4 billion mid-point of Intel's guidance, and EPS estimate from $0.29 to $0.30. Analysts are tweaking 2004 EPS from $1.19 to $1.21 due primarily to an increase in our gross margin assumption from 60.6% to 61.1%. Intel cited anecdotal evidence of a pick-up in the U.S. corporate PC market. While this remains anecdotal, there was a notable difference in the company’s tone from the past, which we view as positive at the margin. Intel also cited an improvement in corporate PC purchases in W. Europe and Japan as reasons for its 3rd quarter strength. Note that the company is not seeing any signs of an inventory build. Intel has yet to see the cost benefits from the conversion to 300mm, as wafer starts began in 3rd quarter and will be aggressively ramped through 2004. While there appears to be a slight delay in 90nm production, revenue shipments are still on track for 4th quarter and expect no material financial impact. The combined effect of 300mm and 90nm is why we have raised our gross margins for 2004 once again.
Unterberg comments on Intel implications for the following semiconductor companies in its universe: Marvell, Brroadcom, Globespan, Asyst/Rudolph Tech. MRVL should feel a positive impact as PC units, particularly in the mobile space were up more than expected. BRCM and GSPN also could benefit from higher portable/notebook units given momentum in WLAN 802.11g. ASYT/RTEC getting mentioned due to management's 2004 300mm focus and 90nm healthy and ready to ship, which is contrary to rumors the co was encountering problems with the technology.
Intel target raised to $40 at Merrill Lynch after the company beat 3rd quarter estimates last night. The firm says the stock looks significantly undervalued at 26x their new 2004 est of $1.20 (up from $1.00), and they see solid ASPs, falling depreciation, and little real competitive threat from AMD for the intermediate term.
ESS Tech said that license and royalty fees from MediaTek have received favorable tax treatment from the Taiwanese government. This favorable ruling reduces the withholding tax rate on the $45 mln in license income, which had been recognized in 2nd quarter of 2003, increasing 3rd quarter earnings by an estimated $0.12 per diluted share.
Linear Tech upgraded at Wedbush Morgan to Buy from Hold following stronger than expected earnings. The firm says they are quite confident that growing mobile PCs, high-end cell phones, consumer electronics, and automotive will accelerate rev growth and will allow it to exceed the still conservative consensus ests of $737 million for 2004 and $884 million for 2005. Price target is $50.
SanDisk reported earnings of $0.60 per share, $0.15 better than the consensus. Revenues rose 99.4% year/year to $281.4 million versus the $246.2 million consensus. The company says that sale of UMC stock helped to raise its tax rate to 35% from the approx. 15% projected at the beginning of the qtr. For 2003, co expects revs to exceed $1 billion, up from firm's previous forecast of $950 million versus consensus $954.28 billion. The company says that it expects the "primary challenge will be to meet consumer demand for our products" during 4th quarter. Separately, company also has news about the misappropriation of proceeds of UMC sale by attorney of Taiwanese law firm.
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