From Briefing.com: 6:07PM Tuesday After Hours prices levels vs. 4 pm ET: After today's slight respite, the bears have once again taken over the market. Cisco's (CSCO) Q1 (Apr) report and Q2 (July) outlook failed to impress traders as they question whether such growth rates are sustainable against more difficult comparisons. Presently, the S&P futures, at 1089, are 6 points below fair value, and the Nasdaq 100 futures, at 1413, are 10 points below fair value.
The below table lists Cisco's results, as well as other relevant news items of the night.
After Hours Mover % Change Move Reason for Move
Abercrombie & Fitch (00C) +2% Teen retailer reports Q1 (Apr) EPS that rose 19% to $0.31 (consensus of $0.30) and revenues that also increased 19% to $411.9 mln (consensus of $400.9 mln); Same store sales were flat for the quarter; Management said it's 'comfortable with EPS estimates in the range of $0.38-0.40 for Q2 (July)' as compared to the Reuters Research estimate of $0.39; Stock moves higher after rallying 4% today
Cisco Systems (CSCO) -2% World's largest networking equip company tops the Street's Q1 (Apr) EPS and revenue estimates, meets its own gross margin guidance, and says its book-to-bill ratio was about 1; On its conference call, Cisco put Q2 (July) revenue growth at up 3-5% sequentially, to $5.78-5.90 bln (consensus of $5.74 bln); Shares trade lower as traders try to rationalize CSCO's valuation (31x FY05 earnings) against its growth rate; Company suppliers BRCM, XLNX, IDTI, and PMCS also take a hit
OSI Pharmaceuticals (OSIP) -1% Biotech company with an oncology focus misses the consensus Q2 (Mar) top and bottom-line estimates by a wide margin; Stock hardly sells off, though, as its anti-EGFR drug, Tarceva, announced positive Phase III results Apr 26 which included meeting the primary endpoint of improving survivability; Stock more than doubled in that day alone; Since then, shares have drifted lower as many analysts believe OSIP already discounts Tarceva's full potential
Pixelworks (PXLW) -7% Marketer of semiconductors/software for the advanced display industry said it plans to offer a $125 mln convertible debt offering; Company intends to use the proceeds for general corporate purposes, including potential acquisitions; The dilutive effect on shares outstanding (which impacts EPS) has prompted the selling efforts
Sycamore Networks (SCMR) +8% Developer of networking products turns in a Q3 (Apr) net loss of $0.03 per share, which was $0.01 better than the Street estimate of ($0.04); Management noted Q3 included the initial purchases of its optical switches for the GIG-BE project; Stock gets a nice bounce as revenues handily beat forecasts ($14.7 mln versus the consensus of $8.8 mln) and SCMR has sold off 37% from its mid-Jan highs
Tomorrow, earnings and economic reports are once again slim, although the March Trade Balance is due out at 8:30 ET. After the close, Walt Disney (DIS) will be reporting its Q2 (Mar) results.
For more detail on these, and other developments, be sure to visit our Stock Market Update and Daily Sector Wrap. -- Heather Smith, Briefing.com
5:27PM Cisco Systems correction (CSCO) : -- Update -- y/y growth of 23-25% was a comparison of Q4 versus prior year Q4, not a comparison of Y04 revs versus Y03 revs. We apologize for any inconvenience.
5:21PM Cisco Systems guidance on conf call (CSCO) 22.25 +0.63: -- Update -- Co guided Q4 revs to increase 3-5% q/q, approx $5.78-5.90 bln, Reuters consensus is $5.74 bln. Sees Q4 gross margin between 67-69% and GAAP EPS to be $0.01-0.02 lower than pro-forma EPS due to amortization and other charges.
4:56PM Cisco Systems sees CEO's optimism increasing (CSCO) 22.28 +0.66: -- Update -- On call says, from a CEO perspective, it is seeing increasing optimism toward economy and their own companies
4:26PM CSCO Suppliers moving after market: BRCM -0.25, XLNX -0.43, IDTI -0.10, PMCS -0.25 and ICST +0.04:
4:08PM Cisco Systems beats by $0.01, beats on rev (CSCO) 22.28 +0.66: Reports Q3 (Apr) earnings of $0.19 per share, $0.01 better than the Reuters Research consensus of $0.18; revenues rose 21.7% year/year to $5.62 bln vs the $5.55 bln consensus. Gross margin were 68.8%.
3:21PM Cisco Systems Preview (CSCO) 22.25 +0.63: -- Update -- Cisco Systems is scheduled to report its Q3 (April) results tonight after the close, with the analyst community almost unanimously expecting strong results. Reuters Research consensus is for $0.18 in EPS on $5.55 bln in sales (1-3% growth q/q), but as some firms note, the real expectations may have already moved higher. Bear Stearns thinks that current rev growth expectations for Q3 now stand at 4-5%, and expectations for EPS a penny above consensus. According to the firm, CSCO's expected rev strength is likely driven by increased activity in April, and healthy growth in the enterprise mkt in particular. Also contributing to growth is the extra week of operations in the April qtr. Firm expects gross margins to remain flat at around 68.5%. Book to bill is expected to be below 1, consistent with normal trends in the April qtr. With regard to guidance, analysts are generally expecting 3-5% sequential growth, with bookings growing somewhat faster, as Cisco should benefit from improving order trends in April, US enterprise market growth, and stronger govt business. On the call, mgmt is expected to take a cautiously optimistic tone, balancing uncertainty in the global macroeconomic recovery against increasing CEO/CFO confidence levels, modest growth in IT spending, and near-term seasonal strength for the July qtr. (See also yesterday's "Looking Ahead" column in the archive for an expanded preview of CSCO's earnings report.)
12:27PM California Micro Devices (CAMD) 13.90 +0.23: California Micro Devices reported Q4 results after the close on Thursday. The fabless designer of application specific analog semiconductors, power management integrated circuits and thin film resistor networks for the commercial LED, mobile computing and consumer electronics, and medical markets posted EPS of $0.08 on revenue of $15.837MM (+47.0% Y/Y) vs. Reuters Research consensus at $0.07 on $15.10MM.
Bookings totaled $16.8MM, driven by mobile products. Gross margin increased 3,982 bps Y/Y to 41.4%. Operating margin increased 4,384 bps Y/Y to 13.5%.
Guided for Q1 revenue of $16.5-16.8MM (+38.6-41.1% Y/Y) vs. consensus at $0.08 on $16.17MM. Mobile and Computing & Consumer products are expected to grow Q/Q. Medical products is expected to be flat to slightly down. Other products is expected to continue to decline. Gross margin is expected to be slightly down Q/Q due to product mix.
CAMD shares are, based on our inverted EVA / DCF model, priced for sustained upper 20% revenue growth from F07 assuming improvement to 22% operating margin.
Shares generally trade at a discount to direct comps. The following table shows price multiples and Y/Y growth rates for CAMD compared against industry comps within the semiconductor components group. Company *P/SG **P/OPG P/S Y/Y Revenue Growth
TTM 2004E 2005E TTM 2004E 2005E
California Micro Devices (CAMD) 2.4 (386.7) 4.5 3.7 2.9 37.5% 23.0% 25.1%
Fairchild Semiconductor (FCS) 1.3 (234.4) 1.6 1.4 1.2 1.3% 21.3% 12.8%
Kemet (KEM) 1.6 (7.1) 2.4 1.9 1.6 42.9% 24.4% 21.0%
Linear Tech (LLTC) 7.1 15.6 15.4 14.6 10.7 26.4% 27.2% 36.5%
Maxim Integrated Products (MXIM) 6.1 17.7 11.7 10.7 7.9 15.4% 24.8% 35.2%
Micrel (MCRL) 3.5 86.8 5.3 4.2 3.5 7.1% 32.7% 21.5%
National Semiconductor (NSM) 2.5 29.0 4.1 3.8 3.1 10.2% 17.5% 22.0%
ON Semiconductor (ONNN) 0.9 96.0 1.3 1.1 0.9 (2.2%) 26.1% 12.1%
Semtech (SMTC) 5.3 34.0 8.4 6.2 5.1 (0.5%) 35.8% 20.5%
STMicroelectronics (STM) 1.5 59.2 2.5 2.2 1.9 16.2% 22.9% 13.8%
Vishay Intertechnology (VSH) 0.9 19.7 1.3 1.1 1.0 18.7% 26.8% 9.9%
Semiconductors 2.5 31.0 4.2 n/a 18.1% n/a
*P/SG Ratio: Normalized Trailing 12 month (Price / Sales) / Growth ratio as of May 7, 2004.
**P/OPG Ratio: Normalized Trailing 12 month (Price / Operating Income) / Growth ratio as of May 7, 2004.
CAMD is increasing penetration into handset manufacturers. The company is selling a greater number of components into more phones. Design win momentum in a growing global handset market, and a PC market that is expected to strengthen over the coming quarters suggests upside to revenue expectations. Operating margin expectations factor in efficiencies from recently completed product rationalization initiatives and reductions in operating expense as a percent of revenue as management scales business, and are below levels for direct comps.--Ping Yu, Briefing.com
9:16AM InterDigital Comm (IDCC) 16.26: InterDigital Communications develops and licenses technologies, including 2G, 2.5G and 3G standards, that are embedded in chips for handsets and wireless base stations.
The company reported Q1 results before the open on Monday. Pro-forma EPS was $0.10 on revenue of $33.016MM (-11.5% Y/Y) vs. Reuters Research consensus at $0.07 on $31.53MM.
NEC contributed 50% of sales; Sony-Ericsson 22%; Sharp 13%. Research In Motion and Sierra Wireless also contributed to results.
Operating margin decreased 2,228 bps Y/Y to 24.5%.
Guided for revenue of $27-30MM per quarter for the rest of the year (+4.7-16.4% Y/Y for Q2). Reuters Research prints Q2 consensus EPS at $0.06 on $31.52MM, and C04 at $0.30 on $131.61MM. Q2 Operating expense is expected to increase 4-6% over first quarter 2004 levels as cost savings from repositioning activities partially offset expenses from recently implemented long-term incentive program. Q3 and Q4 operating expenses are expected to be at or below Q2 levels. Management expects the company will be cash flow positive for C04.
IDCC shares are, based on our inverted EVA/DCF model priced for sustained mid to upper teens revenue growth from C06 assuming 35% operating margin.
The following table shows price multiples and Y/Y growth rates for IDCC compared against the semiconductor group. Company *P/SG **P/OPG P/S Y/Y Revenue Growth
TTM 2004E 2005E TTM 2004E 2005E
InterDigital Communications (IDCC) 3.2 13.5 8.2 7.2 4.1 30.5% 14.8% 74.3%
Qualcomm (QCOM) 6.3 17.8 12.2 10.4 9.5 14.0% 24.2% 9.3%
Texas Instruments (TXN) 2.5 26.2 4.2 3.4 2.9 20.9% 31.8% 15.2%
Semiconductors 2.5 31.0 4.2 n/a 18.1% n/a
*P/SG Ratio: Normalized Trailing 12 month (Price / Sales) / Growth ratio as of May 7, 2004.
**P/OPG Ratio: Normalized Trailing 12 month (Price / Operating Income) / Growth ratio as of May 7, 2004.
IDCC shares are attractively priced on a DCF and on a price-operating income-to growth basis with room for upside to estimates. Management expects to conclude additional licenses during the year which are expected to be accretive to guidance. The company boasts a vast IP portfolio of over 4,000 issued patents and applications, and is developing a number of opportunities including cellular and WLAN.--Ping Yu, Briefing.com
9:55AM KOMG reiterated Buy at Needham 13.18 +0.26: Needham reiterates Buy on Komag (KOMG), but lowers its price target to $20 from $25 due to industry multiple compression. Firm believes KOMG's current valuation represents a compelling investment opportunity for long-term investors given: 1) forecasted industry unit growth through 2008 of 10%; 2) restructured capital structure with lower interest rates and no covenants; 3) significant operating leverage; 4) opportunity to further penetrate existing customers and gain share from weaker players.
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