From Briefing.com: Investors shrugged off weaker than expected Durable Goods data and a dip in New Home Sales as signs that the Fed would not change its accommodative stance during Wednesday's FOMC meeting by bidding stocks higher. While the Fed did not change the fed funds rate, the FOMC did modify the wording of the Fed's policy stance from "policy accommodation can be maintained for a considerable period" to "can be patient in removing its policy accommodation". The revised phrasing was enough to jar investors' complacency about buying growth regardless of price. The averages quickly reversed course following the Fed pronouncement. Tech stocks, which led the market higher in the morning, fell the most in the afternoon. Despite the Fed's change in phrasing, we remain modestly bullish on tech shares but emphaszie the need to be highly selective in choosing stocks.
The Dow (DJI 10468.37 -141.55) and the S&P (SPX 1128.48 -15.57) closed down 1.3% after being up as much as 0.5% while the Nasdaq Composite (IXIC 207737 -38.67) closed lower 1.83% after trading up 0.6%. In contrast, the Philadelphia Semiconductor Index (SOXX 515.27 -2.15) closed down 0.42% after being up over 2.6%. Decliners outnumbered advancers 2:1. The Briefing.com Tech Index (BTI) declined 1.7%. Decliners outnumbered advancers 3.2:1, with decliners falling 3.4% and advancers rising 3.2%.
Broadcom (BRCM 41.63 +1.03) led SOXX shares higher in the morning session after posting better than expected results that confirm what the market already knows, that broadband communications markets are on the rebound, driven by strong consumer spending on digital electronics, accelerating enterprise spending and recovering telecom spending. Despite the obvious, momentum players chose to bid BRCM shares as much as 10% higher before traders had a reality check. BRCM shares are pricing in operating margin expansion of over 2000 bps to over 47%, and sustained, multi-year, high 20% revenue growth from C06, assuming aggressive balance sheet management. It is possible BRCM can grow at this rate near-term given management's acquisitive nature and the high growth markets in which the company plays but it would be a challenge on a sustained and purely organic basis. BRCM acquired 13 companies between 2000 and 2002 valued at over $6.3B. In early 2003, BRCM broadened its SAN product portfolio with gigabit fibre channel chips and firmware by acquiring assets from Gadzoox Networks. On Tuesday, the company posted revenue of $1.61B for 2003, filed a S3 shelf registration to issue securities valued at up to $750MM and filed a S4 acquisition registration to issue up to 30MM shares for potential acquisitions. Management has stated that the company has no immediate plans to draw down the shelf registrations but it certainly looks as if management is about to embark on another buying spree. We would avoid shares at current level given the high growth and margin expectations, steep valuation and the potential for dilution.--Ping Yu, Briefing.com
6:33PM Wednesday After Hours prices levels vs. 4 pm ET: Selling pressure associated with the regular session has stabilized in a sign of the market's continued resilience, with the S&P futures, at 1128, 1 point above fair value, and the Nasdaq 100 futures, at 1493, flat with fair value. Only the tech sector has shown weakness in the after hours with a number of earnings reports inciting selling activity. The below table highlights some of the night's worst performing shares, and the reasons behind the stock's downward move.
After Hours Mover % Change Move Reason for Move
Amkor (AMKR) -3% Subcontractor of semiconductor test services beats Reuters Research consensus EPS and revenues estimates in Q4 (Dec) report and also shows upside in its Q1 (Mar) outlook; Traders sell into the news with the stock having more than quadrupled in the past year
Foundry Networks (FDRY) -16% Communications equipment provider tops the market's EPS expectation by a penny on revenues that rose 28%; Results, however, missed whisper numbers and that has contributed to FDRY's sell-off; Management's comments on the conference call as to 'pricing pressure that has accelerated deal by deal' have also weighed on shares
Internet Security (00C0) -6% Security solutions name meets Street's Q4 (Dec) revised EPS forecast after preannouncing to the upside; Issues in-line to slightly above consensus estimate Q1 (Mar) and FY04 guidance; Stock unwinds some following today's 6% rally
JDS Uniphase (JDSU) -2% Fiber optic communications manufacturer exceeds Reuters Research estimates in Q2 (Dec) report, but says Q3 (Mar) will be unprofitable - at a loss of $0.01 (in line with the consensus);
Veritas Software (VRTS) -13% Supplier of storage software products turns in better than expected Q4 (Dec) report, but guides for Q1 (Mar) GAAP EPS of $0.17-0.20 (consensus of $0.21) on sales of $455-470 mln (consensus of $469.4 mln); Competitors of VRTS include EMC, HPQ, IBM, MSFT, and SUNW
Tomorrow, the market will again absorb a number of earnings reports with Dow components Boeing (BA) and Honeywell (HON) on the calendar. As for the economic calendar, the jobless claims report for the week of January 23 is on tap, and the consensus estimate calls for 1K drop to 340K.
For more detail on these, and other developments, be sure to visit our Stock Market Update and Daily Sector Wrap. -- Heather Smith, Briefing.com
5:53PM STMicroelectronics reports in line, guides Q1 revs higher (STM) 28.29 -0.23: Reports Q4 (Dec) earnings of $0.16 per share, in line with the Reuters Research consensus of $0.16; revenues rose 18.3% year/year to $2.11 bln vs the $1.97 bln consensus. Company sees Q1 revenues of $2.0-2.1 bln, consensus $1.89 bln.
4:45PM Extreme Networks registers 2.58 mln shares for sale by Avaya (EXTR) 9.21 +0.31: The selling stockholder acquired the warrant for which the shares of common stock are exercisable in connection with a Joint Development Agreement and Strategic Distribution Agreement in October 2003. These shares are being registered pursuant to the terms of that transaction.
4:44PM Axcelis Tech reports in-line (ACLS) 10.93 -0.51: Reports Q4 (Dec) earnings of $0.03 per share, in line with the Reuters Research consensus of $0.03; revenues rose 46.4% year/year to $95.9 mln vs the $91.9 mln consensus. Note, there was a small restructuring charge in Q4, but it was not large enough to affect the $0.03 result. For Q1, co expects net revenue (excluding SEN) of $120-$127 mln and EPS of $0.07-$0.10. Note, it's unclear if comparable to consensus of $97.8 mln and $0.06.
4:44PM Sierra Wireless beats by $0.06, ex items, guides Q1 revs above consensus (SWIR) 22.48 -0.65: Reports Q4 (Dec) net earnings of $0.12 per share, excluding integration costs, $0.06 better than the Reuters Research consensus of $0.06; revenues rose 53.1% year/year to $34.6 mln vs the $31.6 mln consensus. Co also guides Q1, sees EPS of approx $0.06, vs the R.R. consensus of $0.06, and revenues of $35.0-37.0 mln, vs an estimate of $29.8 mln.
4:35PM Conexant reports in line, guides (CNXT) 6.89 +0.17: Reports Q1 (Dec) earnings of $0.04 per share, in line with the Reuters Research consensus of $0.04; revenues rose 23.0% year/year to $177.3 mln vs the $173.8 mln consensus. Company calls for Q1 revenue decline of 3-5%, not clear if it is referring to sequential or yr/yr decline.
4:32PM Amkor beats by $0.03, guides higher (AMKR) 20.62 +0.83: Reports Q4 (Dec) earnings of $0.13 per share, $0.03 better than the Reuters Research consensus of $0.10; revenues rose 23.0% year/year to $458.9 mln vs the $453.3 mln consensus. The co is guiding sequental revenue growth in Q1 of 2% to 4% and net income in the range of $0.08 to $0.11 cents per diluted share, which is higher than R.R. consensus estimates of $436.9 mln and earnings of $0.07 per share.
4:28PM TTM Tech beats, guides Q1 above consensus (TTMI) 18.30 -0.20: Reports Q4 (Dec) earnings of $0.11 per share, including a pre-tax restructuring charge of $446,000 to write down assets held for sale and a $411,000 extraordinary gain for purchase accounting adjustments related to ACI, $0.01 better than the Reuters Research consensus of $0.10; revenues rose 153.7% year/year to $54.3 mln vs the $52.3 mln consensus. Co also guides Q1, sees EPS of $0.12-0.14, vs the R.R. consensus of $0.11, and revenues of $55-57 mln, vs an estimate of $53.7 mln.
4:26PM Cadence Design beats by a penny, pro forma; guides Q1 below consensus (CDN) 18.31 -0.27: Reports Q4 (Dec) earnings of $0.24 per share, pro forma, $0.01 better than the Reuters Research consensus of $0.23; revenues rose 12.4% year/year to $307.6 mln vs the $296.8 mln consensus. Company sees Q1 EPS on a Pro forma basis of $0.08-0.10 vs the R.R. consensus of $0.16 on Revs $260-270 mln vs the $277.7 mln consensus.
4:23PM Photon Dynamics beats Q1 consensus, beats on revs; guides for Q1 (PHTN) 41.00 +1.37: Co is reporting Q1 (Dec) earnings of $0.06 per share, which includes numerous charge . It is not clear which charges the analysts had accounted for but regardless PHTN did beat the Reuters Research consensus of $0.00; revenues rose 27.9% year/year to $24.5 mln vs the $22.6 mln consensus. Co sees for Q2 (Mar) revenues to be relatively flat compared to Q1 ($24.5 mln), Reuters consensus is $25.3 mln and GAAP EPS in the range of $0.05-0.13.
4:11PM Intersil reports EPS in line, revs slightly light, guides Q1 (ISIL) : Reports Q4 (Dec) earnings of $0.18 per share, in line with the Reuters Research consensus of $0.18; revenues rose 8.4% year/year to $136.1 mln vs the $136.9 mln consensus. Company sees Q1 EPS of $0.18-0.19 vs consensus of $0.18 on revs of $136-138 mln, consensus $135.15 mln.
4:10PM LSI Logic beats by $0.02, ex items, guides Q1 in line (LSI) 10.67 +0.17: Reports Q4 (Dec) earnings of $0.06 per share, $0.02 better than the Reuters Research consensus of $0.04; revenues fell 3.5% year/year to $462.9 mln vs the $454.2 mln consensus. Co also guides Q1, sees EPS of $0.03-0.05, vs the R.R. consensus of $0.03, and revenues of $445-455 mln, vs an estimate of $436.2 mln.
4:08PM JDS Uniphase beats by a penny, ex items; guides Q3 EPS in line (JDSU) : Reports Q2 (Dec) loss of $0.01 per share, ex items, $0.01 better than the Reuters Research consensus of ($0.02); revenues fell 2.6% year/year to $152.6 mln vs the $146.1 mln consensus. Company sees Q3 EPS loss of $0.01 vs the R.R. consensus loss of $0.01.
4:03PM Monolithic misses consensus by $0.05, (MOSY) 7.94 -0.01: Reports Q4 (Dec) loss of $0.01 per share, $0.05 worse than the Reuters Research consensus of $0.04; revenues fell 57.3% year/year to $3.4 mln vs the $5.6 mln consensus.
3:21PM Intersil Earnings Preview (ISIL) 25.19 -0.04: Intersil reports its Q4 results after the close, with consensus standing at $0.18 in EPS on $136.9 mln in sales. Merrill Lynch believes the co may slightly miss its Q4 rev est of $136 mln and EPS of $0.18 due to potential weakness in desktop power management products (30% of sales); firm also notes that 30% of the co's power management revs consists of desktop voltage core products, where the pricing competition is the worst. Merrill expects the co to provide a 2% q/q rev growth forecast for Q1, with growth in power management and Elantec revenue despite a seasonally weak quarter for its PC-related business. Firm notes the co has improved its cost controls and believes its gross margins will increase another 60 bps to 57.3%. However, they think that is already more than reflected in the stock's valuation.
Anadigics (ANAD) 7.08 -0.76 : Before the open, reported Q4 (Dec) loss of $0.37 per share, excluding a net charge of $0.02, $0.02 worse than the Reuters Research consensus of ($0.35); revenues rose 24.6% year/year to $23.3 mln vs the $20.0 mln consensus. Company sees Q1 loss of $0.41-0.43 vs consensus of a loss of $0.35 on revenues of $19-21 mln, consensus $19 mln.
hi/fn (HIFN) 17.35 -0.66 : Co announced that UTStarcom has integrated HIFN's HIPP 7854 security processor into its Total Control 2000 wireless access platform.
Intel (INTC) 31.38 -0.25 : Digitimes reported that Intel plans to roll out three new 90nm Celeron processors and two new chipsets for the entry-level market in the second quarter. The three new Celeron processors, with a Prescott core, support a 533MHz FSB (front-side bus) speed and 256K cache memory. The prices of these processors, depending on the speed, are as low as US$79. According to the article, the prices are comparable with those of existing 0.13-micron Celeron processors, but should be more cost-effective since the new chips will be made on 12-inch wafers. Intel will also launch two new entry-level chipsets, the 915GV and 910GL, supporting Socket 775 and Socket 478 processors, respectively.
Mattson (MTSN) 11.23 -1.77 : Before the open, reported Q4 (Dec) earnings of $0.02 per share, $0.03 better than the First Call consensus of $(0.01); revenues fell 11.9% year/year to $43.4 mln vs the $40.3 mln consensus. Q4 bookings increased 24% sequentially to $48.5 mln. Co announced that it intends to offer 3.75 mln newly-issued shares of common stock and that STEAG Electronic Systems AG intends to offer 3.75 mln currently-outstanding shares of MTSN common stock in a public offering.
Taiwan Semi (TSM) 11.20 -0.08 : Digitimes reported Taiwan-based foundries which include Taiwan Semiconductor Manufacturing Company (TSM) and Episil Technologies expect to enjoy 10-15% average selling price growth or ASP this quarter due to high utilization rates and an increasing portion of relatively high-ASP products. Having been running close to full utilization, TSMC and Episil have prioritized production for power management and converter ICs over other products and have raised prices to some clients by about 10%. According to sources at the foundries, tight supply for analog ICs, starting in the third quarter of last year, is expected to last through next quarter due to strong demand for handsets and consumer electronics products.
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