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Old 12-08-2003, 09:43 AM
jjgold jjgold is offline
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Default Tech Reports Monday

Optimism on Wall Street is as perennial as grass. The problem arises when Wall Street starts smoking the grass. Optimism turns into absolute certainty and one- and two-year growth forecasts become perpetuities. The cloud that envelops investors form a haze around sustainable growth, margins and valuation.

Over the past year, investors have bid tech shares high in anticipation of robust growth, to the point that company valuations frequently imply that management must achieve revenue growth and margins expansion that far exceed what is sustainable beyond the 1-3 year horizon.

It is against this backdrop that investors, brimming with optimism that the Black Friday start to the holiday shopping season would bring good tidings of ever more robust demand for consumer electronics, greeted the week on Monday and bid tech stocks 1.1% higher. By Thursday, despite Qualcomm's (QCOM 49.48 +0.38) positive outlook on the wireless market, investors had retreated to the sidelines and tech shares had given up Monday's gains and then some as it became apparent same-store sales would come in around consensus. By Friday, the trickle of investors flowing out of tech became a steady stream and tech stocks closed the session 1.1% lower. Decliners outnumbered gainers 2.4:1 with decliners dropping 2.7% and advancers rising 2.5%.

Positive revisions to revenue and earnings forecasts from, among other firms, National Semiconductor (NSM 41.14 -0.66), Qualcomm and Intel (INTC 32.10 -1.44) did nothing to stem the flow as investors continue to awaken to the fact that valuations exceed the sustainable revenue growth and margins expansion assumptions priced into many tech names. This bifurcation among investors, and tech shares, between the optimist and the realist, the richly valued and the less richly valued will persist for some time and pressure shares. Near-term, protect your gains as opportunities arise. Long-term, we remain modestly bullish on tech given strong economic fundamentals, broadening global recovery/expansion and accommodative Fed policy (for added perspective, please visit the Looking Ahead page). Keep an eye on companies with sustainable competitive advantages that are well positioned to capitalize on secular trends and/or are attractively valued, including: Analog Devices (ADI 47.16 -1.39), Hewlett-Packard (HPQ 22.11 -0.49), IBM (IBM 90.64 -0.78), Intel, Microsoft (MSFT 25.98 -0.22), Sandisk (SNDK 64.35 -4.06), Tech Data (TECD 36.55 -0.15), Texas Instruments (TXN 28.36 -0.78), UT Starcom (UTSI 37.16 +0.21) and Yahoo! (YHOO 42.85 -0.28).

Next week, listen in on Microchip Technology's (MCHP 32.44 -2.06) annual shareholders' meeting and Texas Instruments' Q4 mid-quarter financial update on Monday, Cisco Systems', Hewlett-Packard's, BEA Systems' (BEAS 11.59 -0.22) and NetScreen Technologies' (NSCN 24.57 -0.79) analyst meetings on Tuesday, TriQuint Semiconductor's (TQNT 7.34 -0.46) Q4 mid-quarter financial update and Unisys' (UIS 16.36 -0.11) analyst meeting on Wednesday, and Ciena's (CIEN 6.93 -0.11) Q4 results on Thursday. For details, visit the Events Calendar and Earnings Calendar
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Old 12-08-2003, 09:44 AM
jjgold jjgold is offline
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Computer Systems & Peripherals
EMC Corp (EMC) 13.11 -0.02: Co announced it has extended its lead over Hewlett-Packard and IBM as the world's #1 provider of external RAID disk storage systems and networked storage systems in Q3 compared with Q2 of 2003, according to IDC's Worldwide Quarterly Disk Storage Systems Tracker, released today. Friedman Billings upgraded Mkt Perform to OUTPERFORM. Target $12 to $16. Believes stock price does not reflect full growth potential and increase in margins the co can achieve through recent large software acquisitions.

IBM (IBM) 90.64 -0.78: The Wall Street Journal reported IBM execs are seeing signs of an upturn in corporate spending on technology and predicted that Big Blue will grow faster than the rest of the information-technology industry as business expands. According to the article, Chief Financial Officer John Joyce, speaking at IBM's annual presentation to Wall Street analysts in New York avoided comments on the current quarter but he reiterated comments last month by Chairman Samuel Palmisano that "businesses are starting to take some risk".

Networking
There was no news of note in the Networking industry.

Internet
China.com (CHINA) 8.15 -0.09: Co announced that its newly established mobile unit in Australia has signed a binding term sheet to form a 50/50 joint-venture with Soprano Design, a mobile network service infrastructure supplier based in Australia.

Inforte (INFT) 8.11 -0.09: Co continued to expect Q4 to be within its prior guidance. Co sees Q4 revs and EPS of $7-$9 mln and $0.00-$0.04 vs Reuters Research of $7.5 mln and $0.02.

Vastera (VAST) 3.66 -0.11: Before the open, co. affirmed Q4 (Dec) revenue guidance of $21.1-21.7 mln, Reuters estimate is $21.7 mln and lowers its Q4 EPS guidance to break even to a gain of $0.01, previous guidance was $0.02, Reuters estimate is $0.02
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Old 12-08-2003, 09:44 AM
jjgold jjgold is offline
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Semiconductor
Intel (INTC) 32.10 -1.44: Color on Mid-Qtr update (INTC) 33.54: Intel boosted near term guidance (with bullish margin upside), but ThinkEquity says a $600 mln impairment charge relating to its wireless business does reinforce concerns about future growth in non-processor business. The firm believes that it highlights Intel's continuing struggles to establish a large, viable strategy beyond the microprocessor business --which still accounts for 87% of Intel's revenue. This is actually up from the 77% level in March 2001, which seems to imply that despite the aggressive M&A strategy, Intel still hasn't really diversified itself.... CIBC believes that while the headline effect of the impairment charge may hurt the stock, few investors were giving INTC credit for wireless anyway... UBS thinks the market was slightly disappointed that INTC didn't move the top end of its sales guidance... First Albany believes that the good news is built into the shares at current levels and is expecting the shares to experience a mid-cycle correction over the next quarter or so. Analysts' take on INTC"s recently announced $0.06 Q4 goodwill amortization charge seems to be mixed. The majority of the 31 analysts Reuters Research surveys are excluding the charge, so the Reuters consensus is on pro forma basis, ex items, at $0.31 per share. The Reuters consensus prior to annoucement was $0.29, excluding the charge. However, a handful of analysts (9 of them) have adjusted their Q4 estimates to include the $0.06 charge. The consensus among these analysts is $0.25. The estimates inclusive of the charge are ommitted from the $0.31 Reuters Research consensus.

National Semi (NSM) 41.14 -0.66: Tgt raised to $56 from $52 at UBS.

Qualcomm (QCOM) 49.48 +0.38: TI and STMicro launch new CDMA drive against Qualcomm -- Reuters (QCOM) 49.10: Reuters reports that Chipmakers Texas Instruments (TXN) and STMicroelectronics (STM) said on Friday they plan to grab market share from Qualcomm Inc. with their new chipset expected in cell phones during next year's holiday season. TXN, the top supplier of microchips for cell phones, and STMicro, Europe's biggest chipmaker, said their new cdma2000 1X product will greatly enhance what high-end mobile devices do, and will let the two companies better compete with Qualcomm, the leading developer of Code Division Multiple Access (CDMA) technology for wireless devices.

Semi Equipment
There was no news of note in the Semi Equipment industry.

Software
Blue Phoenix (BPHX) 6.22 +0.22: BusinessWeek Online suggested the co is emerging in a niche business that focuses on helping enterprises modernize old software systems so they can adapt them to new applications and markets. According to Dale Vecchio of tech-research firm Gartner, the co should be on the short list of any outfit eager to avoid dumping aging systems in order to save money. According to an unnamed New York investment manager, "The stock still has a long way to rise" . However, he believes the stock, which has no Street following, is a long-term value play trading at 1x sales and doubling in 12 to 18 months. Clients include Merrill Lynch, Safeway, Charles Schwab and Fortis Bank in Europe.

Datatec Sys (DATC) 0.77 -0.39: Co announced that Isaac Gaon has stepped down as Chairman and CEO, effective immediately, and it has appointed Raul Pupo as CEO. Co and Mr. Pupo are currently finalizing the terms of his employment. Prior to founding RP Holdings, a IT investment and advisory services co, where Mr. Pupo was President and CEO, Mr. Pupo founded and was President and CEO of PKS Information Services, Inc., an international information technology services company. Mr. Pupo has also served as a management consultant to private industry, government agencies, and Fortune 500 companies. Co has also retracted its previously announced earnings estimates for Y04 and instead expects a net loss for Q2 of Y04 as well as an overall net loss for Y04, previous Y04 guidance for EPS was $0.12.

Progress Software (PRGS) 21.00 -0.63: Co agreed to acquire substantially all the assets and certain subsidiaries of DataDirect Technologies Limited, a privately-held company specializing in standards-based data access components for software developers. The purchase price is approx $88 mln in cash. The new business is expected to be immediately cash flow positive, dilutive to earnings in the first year, and accretive thereafter. Excluding amortization of purchased intangibles and one-time acquisition-related charges, the acquisition is expected to be immediately accretive.

SCO Group (SCOX) 16.59 -0.05: Co announced that its earnings release and investor conference call previously scheduled for December 8, will be moved to December 22, in order for the Co to finalize the accounting treatment for its recent $50 mln Series A Convertible Preferred Stock transaction. The accounting for the Series A Convertible Preferred Stock will not impact the Co's revenue or cash balance. The Company also reiterates that its Q4 revenue guidance of $22-25 mln, no estimate was available.
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Old 12-08-2003, 09:44 AM
jjgold jjgold is offline
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Telecom Equip
AmTech (ARRS) 6.61 -0.12: American Technology Research reiterated their Buy rating on ARRS, saying a competitor's downgrade of TERN (see 7:24 comment) supports their view that cable operators do not view DOCSIS 2.0 certification as critical at this time for CMTS vendor selection; firm says their conversations with ARRS customers indicate lack of near-term interest in 2.0 deployment and comfort with ARRS's upgrade path; also, ARRS completed a dry-run with CableLabs earlier this month and is confident the next-generation platform will receive certification in the upcoming CableLabs qualification wave ending in March, and notes that there is considerable customer interest in the new platform.

Analogic (ALOG) 41.00 +0.21: Analogic, which makes explosives detectors, has gotten battered lately in light of Needham's downgrade of the stock in mid-October from a Strong buy to a Buy. The co sells airport scanners for checked bags to L-3 Communications (LLL ), which in turn integrates them into devices it sells to the government. The catalyst for the downgrade is attributed to a delay in the co's shipments to L-3: U.S. airports were behind schedule in building structures to house them. However, some big investors haven't cooled off. Eric Miller of Heartland Advisors expects the shipments will go through in due time. According to the article, The Transportation Security Administration's goal was to buy a total of 2,000 scanners at $1 million apiece and last year it bought 1,000 units. This year, the government has budgeted $150 million for airport scanners and has only bought 100 in 2003. Dalton Chandler of Needham expects part of the remainder by April, 2004. Despite the downgrade, the analyst has a price target of $60.

Terayon Comm (TERN) 4.55 -1.22: Deutsche Securities downgraded Hold to SELL . Target $6 to $3.5. Believes the co's opportunity to capture cable modem termination system (CMTS) business is diminished.

Wireless Facilities (WFII) 12.80 -1.14: Co. announced the retirement of its CFO, Terry Ashwill, effective early 2004. Co plans to initiate a search for a new CFO immediately. In the interim, Dan Stokely, WFI's VP, Corporate Controller, and Chief Accounting Officer will be assuming the role of CFO and all finance and accounting activities will be transitioned to him during this period.

Telecom Services
There was no news of note in the Telecom Services industry.
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