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Old 12-18-2003, 10:16 AM
jjgold jjgold is offline
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Default Tech Report Thursday

The Philadelphia Semiconductor Index (SOXX 474.79 -5.17) closed lower by 1.1% on Wednesday for the fourth consecutive losing session. Decliners overwhelmed advancers 16:1 with decliners dropping 1.4% and advancers adding 0.6%. The Briefing.com Tech Index eased 0.3% for the third consecutive losing session. Decliners outnumbered advancers 1.4:1 with decliners falling 2.3% and advancers gaining 2.5%.

After the close, Activision (ATVI 16.41 -0.07) raised Q3 guidance: EPS from $0.45 to $0.67 (Reuters Research consensus at $0.45); revenue from $390MM to $480MM (consensus at $388.3MM). Management cited stronger than expected response to its holiday slate and the strength of its distribution and value divisions. Jabil Circuits (JBL 26.80 +0.63) printed Q1 core EPS of $0.25 on revenue of $1.51B (+41.1% Y/Y), ahead of Reuters Research consensus at $0.23 on $1.406B. Management guided for Q2 EPS of $0.20-0.22 on revenue of $1.35-1.40B, in-line with consensus at $0.21 on $1.349B. Results and outlook are encouraging and should give investors confidence that the recovery in technology remains intact but do not point to an acceleration in growth beyond the levels currently priced into tech shares. As a result, would take opportunity to sell tech shares into strength. That said, Jabil is moderately priced at high single digits to low teens growth and is likely to trade well in the coming weeks. Solectron (SLR 6.02 +0.30) reports Q1 after the close Thursday
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Old 12-18-2003, 10:17 AM
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Computer Systems & Peripherals
CSFB trimming estimates on Hard Disk Drive suppliers : Maxtor (MXO 9.83 +0.21). Seagate Technology (STX 17.50 -0.11). Western Digital (WDC 10.63 -0.07).
CSFB is trimming revenue and earnings estimates for the big 3 HDD suppliers (STX, MXO, WDC). Most of the estimate reductions occur in the March 2004 qtr although firm has reduced Dec 2003 estimates for STX and MXO. Firm also has reduced price targets for all three stocks. This action follows discussions with a number of HDD industry sources. Desktop pricing appears to have worsened in Dec and inventories remain on the high end of normal ranges with little time remaining in the quarter. Firm's sense is there needs to be a spectacular finish to the quarter in order for all HDD suppliers to make their Dec quarter estimates and still guide the March quarter in line.


Dot Hill Systems (HILL) 15.00 -0.35: Adams Harkness downgraded Strong Buy to BUY. Target $19. Cited concerns that the co does not have the pending Sun Micro contracts locked up.

Tech Data (TECD) 38.94 +1.47: Robert W. Baird upgraded Neutral to OUTPERFORM. Target $45. Cited improving European competitive picture, IT harmonization benefits, firming demand environment, and reasonable valuation.

Networking
3Com reports (COMS) 7.70 -0.20: After the close, reported Q2 (Nov) operating loss of $115 mln, which includes a $58.9 mln restructuring charge. Backing that out, we came up with a loss of $0.15 per share, not clear if comparable to the Reuters Research consensus of ($0.14); revenues fell 33.2% year/year to $181.9 mln vs the $166.2 mln consensus. Co expects Q3 total rev to be "flat to down slightly" from Q2, which is roughly in-line with consensus of $165.5 mln. Co also stated that while it had earlier this year established an "aggressive goal" of breakeven cash flow from operations in Q4 of this fiscal year, they said "while we expect to show considerable improvement in the fourth quarter, the breakeven cash flow objective may be too aggressive."

Extreme Networks (EXTR) 6.57 +0.22: Wachovia upgraded Extreme Networks (EXTR) to Mkt Perform from Underperform based on valuation, as firm thinks the stock is fairly valued after reporting lower than expected results; valuation range is $5-$8.
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Old 12-18-2003, 10:17 AM
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Internet
24/7 Media (TFSM) 1.37 -0.03: Co has agreed to acquire the 91.3% of the outstanding shares of Real Media Korea it does not already own for approx $5 mln in cash and approx 10.7 mln shares of TFSM common stock, valued at approx $16 mln. TFSM sees deal immediately accretive. "The acquisition gives 24/7 Real Media a leadership position in the South Korean marketplace as the first step in its expansion into Asia."

E*TRADE (ET) 11.43 +0.33: Before the open, boosted forecasts, announced $100 mln repurchase program. Repurchase plan is effective immediately. Company raised Y03 GAAP EPS guidance to $0.50-0.54 from $0.40-0.48, ongoing operations guidance remains the same at $0.56-0.58, this compares to Reuters consensus of $0.58. For Y04, ET established Y04 GAAP EPS guidance of $0.70-0.85 on revenues of $1.5-1.7 bln, consensus is $0.69 and $1.58 bln, respectively.

j2 Global (JCOM) 23.86 +1.43: First Albany upgraded j2 Global (JCOM) to Buy from Neutral based on valuation, citing the more than 50% drop since their downgrade 7 weeks ago and a PEG of 0.7x; while firm says they may be early given that headline risks remain, they believe that operationally the business continues to perform at the high-end of expectations and that there is more upside than downside at the current price level. Maintains $32 target.

Provide Commerce (PRVD) 13.00 -2.00: Provide Commerce priced its IPO at $15, in the middle of the expected $14-$16 range. PRVD operates an online marketplace for flowers, fruits, meats, and other perishable goods that are shipped direct from the supplier to the customer via FedEx. Its flowers are sold via its Proflowers.com brand. The co says its flowers are generally 7-9 days fresher than flowers delivered via the legacy floral supply chain. Its price points start at $29.99 and on average are significantly lower than other online floral merchants. For the fiscal year ended June 30, the co reported net sales of $88.7 mln, up 26.2% yoy, and the co is profitable. This is a 4.3 mln share deal, led by SG Cowen, set to begin trading this morning.... Briefing.com's take is that PRVD is cross between a scaled-down home grocery delivery service and a 1-800-Flowers (FLWS 10.51) service. FLWS, which is also profitable, has been a strong mover this year, up 40% YTD... Platinum subscribers may view Briefing.com's IPO Preview for a look at this busy week on the IPO front.

RealNetworks (RNWK) 4.91 +0.16: After the close, co announced that Ericsson Mobile Platforms has licensed the media engine powering RealOne Player, the Helix DNA Client, as well as the RealAudio and RealVideo codecs. Ericsson will optimize RNWK' technology for digital media playback on mobile devices using the Ericsson reference design.

TIBCO Software (TIBX) 6.17 -0.04: After the close, reported Q4 (Nov) earnings of $0.04 per share, excluding items, $0.02 better than the Reuters Research consensus of $0.02; revenues rose 2.4% year/year to $73.0 mln vs the $67.8 mln consensus.

VeriSign (VRSN) 15.32 -0.22: The Wall Street Journal reported VeriSign plans to acquire Guardent Inc. in a deal totaling $140 mln in cash-and-stock. This move furthers the co's attempts to deepen its offerings in the Internet security market. According to the article, the deal gives the co a stronger presence in managed-security services, which allows companies to handle important information-security chores on behalf of corporate clients such as monitoring for intruders on a company network.

Semiconductor
California Micro (CAMD) 8.30 +0.40: Needham & Co upgraded Hold to BUY. Target $10. Believes co's business has clearly gained momentum as sales continue to benefit from strong mkt penetration gain.

ESS Tech (ESST) 14.96 +0.01: The purpose of the agreement is to combine ESS's VGA technology with Hansung's module technology to produce a lower cost, more flexible product offering for camera phone OEMs. According to the agreement, ESS will supply its CMOS VGA image sensors to Hansung for the manufacture of camera-phone imaging modules.

Marvell (MRVL) 36.54 -0.15: Comes under pressure due to CSFB disk drive estimate cuts (MRVL) 35.89 -0.79.

Rambus (RMBS) 25.88 -4.17: Judge seeks delay in FTC ruling - Reuters (RMBS) 26.75 -3.30: Reuters reports that a U.S. administrative law judge said he needed more time before ruling on govt charges that Rambus illegally monopolized key computer chip technologies. Administrative Law Judge Stephen McGuire said he had asked the Federal Trade Commission to extend a deadline for the ruling by two months to Feb 17 (McGuire had been expected to hand down a ruling by this Thursday). The FTC is seeking to deny Rambus the billions of dollars in royalties it could reap from computer chip manufacturers such as Micron Technology and Korea's Hynix Semiconductor.

Trident Micro (TRID) 14.56 -1.77: Weakness being blamed on report that Intel is planning to introduce a new chip that could remake the digital TV market. It is reported that Intel is expected to disclose the development of a class of advanced semiconductors that will improve the quality of large-screen digital televisions and substantially lower their price... After checking around, Briefing.com is finding that Unterberg is calling Intel entry into Digital TV market a "non-event" as far as Trident Microsystems is concerned, and that weakness on this news creates a buying opportunity. One of the points firm makes is that initially Intel will compete in rear projection TVs like Texas Instrument's DLP with microdisplays. If this is the case, firm believes it could actually be complementary to Trident's electronics portion, ie., they could sit side by side in a microdisplay based RP TV.
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Old 12-18-2003, 10:17 AM
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Semi Equipment
: Moors and Cabot providing its forecast for Thursday's SEMI (Semiconductor Equipment and Materials Institute) North American Book-to-Bill ratio for the month of November. The firm anticipates November to have a modest uptick from October levels to possibly reaching 1.06, which reflects the firm's expectations of the back-end segment showing strength in orders. Moors and Cabot believes the best leveraged companies in its coverage universe include AMAT, ASYT, CYMI, LTXX and VSEA. The firm also notes it is feeling more enthusiastic about the prospects of TER and continue to monitor the stock closely.

Amkor (AMKR) 16.78 -0.27: American Technology Research reiterated their Buy rating on AMKR; firm says checks continue to indicate that strength from the foundries and chipmakers is translating into increased unit demand for test and packaging, and says the pricing environment remains firm and visibility into early 2004 is extending; firm believes that the co could earn $1.75 in CY05 (well above consensus of $1.22), and notes that the stock is trading at only 9.7x that number, which implies greater than 60% upside potential given industry peak multiples in the 18-22x range.

Software
Autodesk (ADSK) 17.60 +0.07: Adds 16 mln shares to stock repurchase authorization to offset employee stock options.

BEA Systems (BEAS) 12.10 -0.08: BEA Systems (BEAS 12.10 -0.08). Commenting on last night's Reuters report that BEA Systems said it was not a takeover target (even though Oracle has expressed interest in the co), SG Cowen said that this is not co's decision to make, as Oracle has clearly stated plans to do large acquisitions regardless of the outcome of the PeopleSoft bid. Internet Security (ISSX 17.87 +0.58). Raymond James upgraded Internet Security to Outperform from Mkt Perform, saying they have become increasingly confident with ISSX's momentum in the intrusion detection/intrusion prevention marketplace over the past few weeks; firm says customer and reseller feedback for the Proventia line of intrusion prevention appliances suggests positive product evaluations and overall traction, and firm believes there is a generally underappreciated opportunity for ISS to secure upgrade sales to existing RealSecure customers. Target is $21.

Cognos (COGN) 31.46 -0.45: After the close, reported Q3 (Nov) earnings of $0.26 per share, $0.01 better than the Reuters Research consensus of $0.25; revs rose 24.7% year/year to $172.2 mln vs the $171.0 mln consensus. Co. sees Q4 (Feb) EPS of $0.32-0.35, Reuters estimate is $0.35 and revenues in the range of $191-194 mln, estimate is $194 mln. For Y04, sees EPS of $0.92-0.95 (consensus $0.94) on revs of $672-675 mln (consensus $673 mln)... Previous comment used FY05 consensus instead of FY04 consensus.

Dassault Systems (DASTY) 44.20 -0.19: Company partners with Boeing (BA) to enhance its entire suite of V5 Product Lifecycle Management (PLM) solutions to provide unique, pioneering digital processes and tools required for 7E7 global development environment. Co's dedicated PLM offering will enable BA and its partners to drive innovation and develop new production techniques at every phase of the 7E7 program.

Eclipsys (ECLP) 10.84 +0.59: Company announced Calgary Health Region has selected its SunriseXA advanced clinical solution and workflow modules, will implement in 4 hospitals. Calgary Health Region is long time ECLP client, been using company's products since 1989.

Netscreen (NSCN) 23.25 -0.12: Amtech commented that SARS concerns have surfaced again in the Asian markets following the discovery of a new case in Taiwan. So far, only one new case has been discovered, so it's much too soon to call this a resurgence. Nevertheless, firm believes that investors should be aware that NetScreen is highly sensitive to any news in this area as it has by far the highest exposure to ASPAC (39% of revs in F03) of any co in firm's coverage universe. Further, mgmt originally put out disappointing guidance for FQ4 (Sep) based on SARS concerns - fanning this issue - though the company subsequently posted a strong quarter nonetheless.

Progress Software (PRGS) 21.08 +0.72: Before the open, reported Q4 (Nov) earnings of $0.23 per diluted share, $0.01 better than the Reuters Research consensus of $0.22; revenues rose 13.7% year/year to $82.0 mln vs the $80.0 mln consensus.
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Old 12-18-2003, 10:17 AM
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Telecom Equip
: Optical Comm (OCPI 3.13 +0.01). Roth upgraded Optical Comm to Buy from Neutral for several reasons; First, after recent conversation with mgmt and channel checks, firm believes the business environment continues to improve. Second, there were some positive data from Finisar's (FNSR) latest results. And, lastly, there was a pleasantly surprising announcement from the telecom industry yesterday, in which SBC (SBC) has selected Alcatel (ALA) as its FTTP equipment vendor.
Sonus (SONS 7.61 +0.03). Pacific Crest reiterated its Buy rating on Sonus believing that co is well positioned for FY04 given announcements by Q, SBC, VZ, BLS, CVC, Time Warner Cable, and T that they are entering the VoIP market.


Juniper Networks (JNPR) 17.03 +0.43: Buckingham Research upgraded Neutral to ACCUMULATE. Target $20. Cited expectations of improving visibility as well as rapid EPS and rev growth into 2005.

Qualcomm (QCOM) 49.32 -0.47: Co announced that Pegaso Comunicaciones y Sistemas S.A. de C.V., has prepaid in full to QCOM the principal amount of all outstanding loans owed under an equipment loan facility, in addition to accrued interest. The principal amount of the prepayment was $192 mln. QCOM will recognize $10 mln in deferred interest income as a result of the prepayment. QCOM's prior guidance for Qualcomm Strategic Initiatives (QSI) segment for fiscal 2004 was a net cash investment of $250 mln. As a result of this cash prepayment, co's revised guidance for QSI for fiscal 2004 is a net cash investment of $60 mln.

UTStarcom (UTSI) 36.36 -0.50: Co announced that it has signed an expansion contract valued in excess of $40 million with Yahoo! BB, the leading provider of broadband services in Japan. The contract is for further deployments of UTStarcom's AN-2000 IB, a carrier-class IP-based digital subscriber line access multiplexer (IP-DSLAM) powering Yahoo! BB's ADSL service.
Co announced that it has signed an expansion contract valued at approx $23 mln with China Telecom that will enable further deployments of UTSI's IP-based PAS system in the Yunnan province.

Rising competition engenders risk to 2004 forecasts -- Lehman (OPENX) 36.86: Despite firm's confidence in UTStarcom's (UTSI) leadership in P.A.S. handsets, Lehman believes rising competition engenders risk to 2004 forecasts; firm believes that competition in the P.A.S market has increased substantially, noting that several local vendors expect 50+ brands by mid-04.


Telecom Services
CheckFree (CKFR) 26.59 +0.04: Co announced an agreement with UIL Holdings Corporation to acquire American Payment Systems, Inc. (APS), a leading U.S.provider of walk-in bill payment services. Under the terms of the agreement CheckFree will pay apprx $110 mln in cash for the outstanding stock of APS. The transaction is expected to close before the end of CheckFree's 2004 fiscal year, which closes on June 30, 2004. CheckFree will provide specific financial guidance for this transaction upon closing
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