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U.S. stocks rose after the Federal Reserve reassured investors that any increase in its benchmark interest rate will be ``measured,'' even as policy makers dropped their pledge to be patient in boosting borrowing costs. Tyco gained after the company boosted its 2004 profit forecast. Teva Pharmaceutical, the world's biggest generic-drug maker, increased after earnings beat estimates. The S&P 500 Index rose 2 points (+0.2%) to 1119. The benchmark jumped 26 percent last year and is up 0.7 percent so far in 2004. The Nasdaq gained 11 points (+0.6%) to 1950. The DJIA added 3 points to 10,317. Four stocks advanced for every three that fell on the New York Stock Exchange. Some 1.7 billion shares changed hands on the Big Board, 13 percent more than the three-month daily average.

Strong Sectors: gold, mining, steel, coal, communications equipment
Weak Sectors: casinos, insurance

Top Stories . . . Federal Reserve policy makers voted unanimously to keep the benchmark U.S. interest rate at a 45-year low of 1 percent and suggested they will lift borrowing costs at a ``measured'' pace to head off inflation.

The 10-year U.S. Treasury note fell in New York after the Federal Reserve signaled it can raise interest rates at a ``measured'' clip, suggesting to some investors that the policy may lead to faster inflation

The dollar traded near a three-week low against the euro after the Federal Reserve left its key interest rate at a four-decade low of 1 percent and said it can take a ``measured'' pace in raising borrowing costs.

U.S. auto sales rose 0.8 percent in April as Toyota Motor Corp. and Nissan Motor Co. benefited from an expanding economy and new models and as fleet customers bought more General Motors Corp. vehicles.

Tyco International, the world's biggest maker of security systems, said fiscal second-quarter profit surged because of cost cuts and higher sales of electronics and new health-care products. The company raised its 2004 forecast.

Warren Buffett, the world's second- richest man, and Bill Gross, the biggest bond manager, lead a small but growing number of investors who say the Federal Reserve should already have raised overnight lending rates to nip inflation before it gets out of hand.

Frank Quattrone, the highest-ranking securities executive to face prison since junk-bond pioneer Michael Milken was sentenced, will try to overturn his obstruction-of-justice conviction by attacking evidence rulings by the presiding judge, his lawyer said.

Pioneer Natural Resources, which produces oil and natural gas in North America and Africa, agreed to acquire Evergreen Resources Inc. for about $1.7 billion in cash and stock to add gas reserves in the U.S. Rocky Mountains.

Fed Policy . . . Today, the Fed kept its benchmark interest rate at a 45-year low of 1 percent.

The Fed's rate will probably rise to 1.25 percent in the third quarter and 1.5 percent by the end of 2004, according to the median forecasts of 58 economists surveyed by Bloomberg news from April 27 to April 30. They predict the rate will rise to 2.75 percent in the third quarter of 2005.

``At this juncture, with inflation low and resource use slack, the committee believes that policy accommodation can be removed at a pace that is likely to be measured,'' members of the rate-setting Open Market Committee said in a statement following their meeting in Washington.

``The economy's on a good footing going forward. Rates may be going up, but they won't be as much of a headwind.'' Philip Tasho, money manager in charge of $220 million at Tamro Capital Partners.

``It gives equity investors comfort that things will be predictable, rather than excessively rapid or destabilizing to the pace of the recovery.'' Jack Caffrey, equity strategist at J.P. Morgan Private Bank, which oversees $280 billion in New York.

Where will the rates go and when. In the Wall Street Journal today, Richard Berner, economist for Morgan Stanley, thinks somewhere north of 4.0%. However, on CNBC this morning, Wayne Angell, former Vice Chairman of the Fed, says he believes a neutral Fed policy is 1½%, just 50 basis points from the current level. Angell says the language might change at this meeting, but the Fed will signal a rate change at the June meeting, and raise Fed funds in August. He thinks the August hike could be 50 basis points. With the election interceding, Angell projects a 2005 rate hike to a range of 2.0%-to-2.5%. While inflationary pressures are rising, it has not found its way to the critical wage area, as yet.

Quotes of Note . . . ``Corporate profits are coming in better than expected. That's the most important thing. We can handle one or two rate increases as long as they're small ones.'' Fritz Reynolds, who manages the $225 million Reynolds Mutual Funds.

Gurus . . . On the profit front, Ed Hyman's ISI Service says nominal GDP in the second-quarter will be bigger than the first-quarter, and as a result, earnings could be up more than the 27.0% estimated in the first-quarter. They could be up 30.0%.

IPO . . . Silicon Strategies has heard from sources that the IPO of shares in Freescale Semiconductor Inc. by Motorola may not go ahead as planned. Silicon Strategies heard that a sell-off of shares in Freescale in the Spring of 2004 was the plan, but it was pointed out that selling off Freescale may no longer be in Motorola shareholders' best interest, at least in the short term. Motorola SPS has weathered the industry's longest and deepest slump and undergone considerable restructuring, but now the industry is in a recovery phase, and apparently a very strong one, which means that Freescale sales should start to climb and profits return. In addition, Motorola has its own problems and Freescale represents $4.6 billion of rev, much of which is good steady business. "You rarely make things better by cutting rev. You make things better by cutting cost," the source said. On the other hand it would seem strange to have Freescale Semiconductor as a differently named but wholly owned subsidiary of Motorola. And folding Freescale back into Motorola or renaming it as Motorola Semiconductor would probably be perceived as unacceptable dithering, even if Zander claimed the spin-off was not his plan in the first place.

Financials . . . Janney Montgomery Scott comments that despite generally positive 1st quarter 2004 earnings, bank and thrift stock prices were hammered in April because of mounting concerns regarding higher interest rates; stocks were particularly vulnerable, given their lofty valuations due to M&A speculation rather than economic fundamentals. Firm thinks most companies, particularly banks, are asset sensitive and earnings will not necessarily be harmed by higher interest rates, provided that such increase is gradual and accompanied by a stronger economy, which would spur loan demand. Firm is seeking selective buying opportunities, particularly where stock prices of quality companies have been unduly punished because of sector rotation or other non-fundamental reasons. Firms top picks among the small-cap bank, mid-cap bank, and thrift universe are First Niagara Bancorp and New York Community Bancorp.

Equity Office reported funds from operations of $0.66 per share, in line with the FFO consensus of $0.66; revenues rose 1.0% year/year to $796.2 million versus the $777.7 million consensus. The company sees 2004 funds from operations of $2.55-2.70 vs consensus of $2.64.

MBNA has again been speculated to be interested in buying Egg, the UK on-line credit card lender still 79% owned by UK's Prudential insurance. While the acquisition makes sense strategically, the current 155p share price of Egg would seem too high to justify a purchase. We believe MBNA remains as focused on returns as it has historically which should influence the price paid. The speculation was repeated by a London newspaper, implying for a second time that MBNA is close to buying Egg for 1.4 billion UK pounds or about $2.5 billion. That equates to a premium of about 7.7% over the current share price and a premium to receivables of about 33%. Egg is profitable in the UK, but losing money in France. At March 31, Egg had credit card loans of about 3 billion UK pounds and other consumer loans totaling 2 billion UK pounds. The UK business generated a return on assets of about 1.2%. Losses in France, however, more than

offset those profits. In its early days as an "Internet" business (IPO in 2000), Egg generated significant losses as it focused on customers rather than profits. Over the past two years, profitability in the UK business has increased dramatically and the company's 2.8 million card customers represent an attractive franchise (at a price).

Analysts met recently with CFC’s Senior Managing Director - Corporate Development (Eric Sieracki) to discuss the company’s recent progress and strategies for future growth. There were several incremental tidbits which further support our positive view of CFC’s shares. First, while recent growth goals are admittedly bold and top-down driven, CFC has a plan for achieving targets (e.g., 30% origination market share by ‘08) including doubling of its variably compensated sales force and further retail expansion. Second, while production margins should eventually “normalize” to 35-70 bps, they may stay higher for longer (exp 85 bps in ’04) given a higher proportion of higher margin loan production (incl home equity and subprime). Third, while the “servicing hedge” has been effective over the past decade, CFC may reduce its use of

this relatively higher cost source of “insurance”–using more targeted inventory sales to offset lower production earnings (as in 1st quarter 2004) as rates rise. Fourth, while we believe CFC is more “acquisition ready” than ever before, servicing deals may not be imminent since the company still suffers from a leverage disadvantage versus other prospective bidders and management prefers to allocate capital to organic growth.

Alexandria Real Estate does not have any obvious comparisons, given that it is the only REIT focused solely on the biotech industry and, specifically, laboratory office space. That said, a group of other office companies, including Boston Properties, CarrAmerica, Equity Office Properties, Glenborough Realty, and Prentiss Properties, together make up a relevant comparison set. Alexandria trades at 113.1% of NAV, which calculate to be $50.33 per share, an 18.0% premium to its peer group average of 95.9% of NAV. At a 14.4x estimated 2004 CAD multiple, however, Alexandria is trading in line with its peer group average (14.3x). Given Alexandria’s above average growth potential, especially in contrast to its pure office peers, forecast a year-end 2004 target price of $66 (was $72), which assumes 6% multiple expansion and a target 2005 CAD multiple of 15.3x. Analysts lowered target price to reflect the sell-off of REITs in general over the past month, and the reduced multiples at which the group is currently trading. Achieving a new target price, combined with a current dividend yield of 4.2%, would generate a total return of approximately 20%. Alexandria owns and operates 5.7 million square feet of office/laboratory space, in 89 properties, with the largest concentrations in San Diego, suburban Washington DC, the San Francisco Bay area, Eastern Massachusetts, and Seattle. Primary tenants include pharmaceutical, biotechnology, and life science product and service companies.

Diversified . . . Tyco reported earnings of $0.41 per share, $0.05 better than the consensus of $0.36. Revenues rose 11.7% year/year to $10.04 billion versus the $9.60 billion consensus. Company sees 2nd quarter EPS of $0.39-0.42 versus consensus of $0.40; for 2004 sees $1.52-1.58, consensus $1.51.

Energy . . . PG&E Corp reported earnings of $0.41 per share, excluding one-time gains, $0.01 better than the consensus of $0.40. Revenues rose 27.6% year/year to $2.72 billion. Company sees Y04 EPS of $2.00-2.10 versus consensus of $2.06.

Defense & Aerospace . . . Northrop Grumman reported earnings of $1.25 per share, $0.04 better than the consensus of $1.21. Revenues rose 21.1% year/year to $7.11 billion versus the $6.32 billion consensus. The company sees 2004 EPS of $5.60-5.90 versus consensus of $5.80 on revenues of approximately $28 billion, consensus $28.2 billion.

In a Business Wire release, Source Capital Group announces that it has upgraded its opinion on Taser International Inc to a BUY from Hold with a $45 tgt. "The recent price drop has brought the earnings multiple down to levels that make the stock compelling on a valuation basis," stated Joe Blankenship, vice president research at Source Capital in Scottsdale, Ariz. Blankenship continued, "We think our 2004 and 2005 EPS estimates have some upside potential as the company continues its market penetration in law enforcement in the United States and makes headway with agencies in international markets. At approximately 30 times our 2005 EPS estimate of $1.04 per share, Taser's stock is attractive for a company growing at 75% - 100% per year".

Transports . . . The Wall Street Journal suggests on Sunday, when Southwest Airlines begins to serve Philadelphia, the launch will mark the culmination of an atypically muscular marketing campaign and the onset of what is expected to be no-holds-barred competition with US Airways. According to the article, already, US Airways has declared that Southwest is trying to "kill" it, and last week US Airways slashed fares in the market, which happens to be its biggest hub. Excluding Philadelphia, Southwest provides service to 58 cities and 59 airports in 30 states.

It appears that April auto sales will come in at the low end of range of expectations at roughly 16.7 million units on a SAAR basis, this would compare only slightly favorably to a year ago and would be roughly in line with the rate we experienced in March. Ford reported weaker than expected results with sales off 4%; the Chrysler Group of DCX was roughly in line, up

1%, with strong sales of the new 300; analysts expect GM to report a sales figure that was up approximately 3% from a year ago. Foreign automakers, in aggregate, were up with Asian brands doing slightly better (+5%) in April than European brands (+4%). Nissan (+14%) and Toyota (+10%) were up while Honda (-2%) was down; of the European brands, German makers, BMW (+12%) and Porsche (+15%) were up, while Volkswagen (+1%) stemmed a streak of year/year

losses. With sales that were weaker than most would have liked, inventory levels continue to run high; as such, we would expect another uptick in incentive spending, as analysts do not anticipate any NA production cuts for the second quarter; however, a weak May could put a damper on 3rd quarter production.

Food & Beverage . . . Kraft Foods, the largest North American food company, is planning a distribution deal with Starbucks that will put Seattle's Best Coffee in grocery stores throughout the United States later this year, a Kraft spokeswoman said on Monday. Starbucks completed the purchase of the parent company of Seattle's Best last July.

Kellogg’s stock has been a stellar performer and its relatively high valuation causes us to wait for another good buying opportunity. Bucking the Atkins trend and the impact of higher ingredient costs may be helped short term by these lower than expected benefits costs. But the biggest benefit has been international growth which may continue although we remain a little worried about the important U.K. market. K has gained a lot of market share around the world and that

trend is one we will continue to watch with some tougher comparisons ahead.

Retail . . . Jefferies upgrades Gap Stores to Buy from Hold, as they see two near-term catalysts that could drive the stock higher: 1) firm expects the co to beat 1st quarter consensus on May 20 (firm's estimate is $0.29 versus consensus of $0.27), and 2) company will report April same-store sales results on May 6, and firm thinks mgmt could provide Q1 earnings guidance then that exceeds consensus, and if guidance is not given, the Street may raise Q1 ests after April sales results are announced. Target is $26.

Last night Best Buy hosted an analyst dinner to discuss its customer centricity initiatives. The presentation was primarily theoretical in nature, and somewhat short on executional details.

Store visits today may answer some of our questions. The company's customer centricity initiatives are essentially an attempt to transform the corporate culture at BBY by having store employees focus on customer needs as opposed to sales of product. Management stated that comp-store sales at customer centricity stores were, on average, 700 bps higher than other BBY stores, while gross margins were 50 bps higher, but SG&A costs were 240 bps higher. Clearly, in our opinion, the company achieved strong results, however, going forward, the challenge will be to achieve similar results in a less costly fashion. Analysts applaud management for attempting such a difficult transformation in its organization, and if the company is successful we believe it would create significant competitive advantage. However, the transformation will not be easy, and success may be dependent upon a number of unknown variables.

Safeway reported earnings of $0.16 per share, which excludes $0.06 charge for closing of Dominick's stores, but includes $0.27 Southern California strike charge. Reuters Research has informed us that their consensus of $0.28 is compiled on the same basis. Revenues fell 5% year/year to $7.64 billion vs the $7.89 billion consensus. SWY reaffirms 2004 EPS guidance of $1.95-2.03, which excludes both the Southern California strike charges and the Dominick's charges and is not comparable to consensus estimates.

The WSJ highlights Coinstar, which operates change-counting machines in almost 11,000 locations, mainly supermarkets. It charges shoppers a hefty 8.9% commission for its services. Still, the company is growing briskly, rev for the first three months of the year were up 13.3% from the year-earlier period; Coinstar says it is on track to add a total of 1,000 new machines this year. WSJ made an experiment, hauled a bag of change into Commerce Bank and Citibank, and dumped another one into a Coinstar machine in a NYC supermarket. They also bought a coin-counting gadget from Office Depot. The WSJ wanted to test speed and accuracy. For consistency, they began with equal piles of $87.26 worth of pennies, nickels, dimes and quarters that they had gotten from a local bank in coin envelopes. The machines at both Commerce Bank and Coinstar gave them less back than they put in, Commerce Bank missed by a whopping $7.02, while Coinstar was off by 57 cents. Makers of coin-counting machines say errors, referred to in the industry as "variances," happen when foreign objects, from paper clips to overseas coins, get into the mix. Alarmed at the results, columnists decided to give the machines a second chance. They painstakingly counted out two batches of $68.23 in change. But once again, both Commerce Bank (82 cents) and Coinstar (14 cents) were off, in the machine's favor. A spokesman for Commerce Bank says the accuracy rate of the co's machines last month was 99.9%. He called WSJ $7.02 deficit a "highly unlikely" result. Coinstar also says columnists experience was atypical. For disputes under $15, the stores will typically refund on the spot, a spokeswoman said.

Healthcare . . . Tenet Healthcare reported pro forma earnings of $0.05 per share, which excludes $0.31 in charges and discontinued operations, in line with the consensus of $0.05. Revenues fell 2.9% year/year to $2.67 billion versus the $2.64 billion consensus. First Call EPS consensus is $0.03, however this includes at least one estimate of a loss of $0.15, which includes charges and is not comparable to pro forma results.

Barron's Online highlights LifePoint, whose shares have almost doubled in the past year, but may continue to rise. LifePoint is growing its way out of bad debt, recruiting new doctors and adding new hospitals to keep admissions climbing, while controlling costs and expanding margins. And new Medicare funding also should swell LifePoint's bottom line this year. But perhaps most importantly, the portion of rev consumed by unpaid medical bills has decreased from qrtr to qrtr over the last 9 months, suggesting that bad debt is stabilizing. "The stock may be catching people's attention because of the Q1 performance, but it remains an underappreciated name in health care services," says A.J. Rice, an analyst with Merrill Lynch. "Bad debt is something the hospital industry has to live with at this point," says Lee Grout, co-manager of the Berwyn Fund. "They have to learn to manage it, which is what LifePoint has been doing, and doing well." "I am not saying the war is over with bad debt. But it seems that it will not be getting dramatically worse," says David Dempsey, an analyst with Avondale Partners, who upgraded LifePoint to Buy last week. That may be good enough to bolster the stock price. At 18.23x expected earnings over the next four qrtrs, the shares trade in line with the S&P500 index and at a 6% discount to the hospital industry. Historically, the stock trades at a 70% premium to the industry and a 30% premium to the S&P500. If LifePoint keeps "doing what it is doing," says Mr. Dempsey, it could trade at 17.3x his projected earnings for '05 of $2.42, or $42 a share. What's more, some analysts insist that management's guidance calling for profits of $2.00 to $2.04 a share in '04 is too conservative.

Drugs . . . Teva Pharm reported earnings of $0.64 per share, $0.06 better than the consensus of $0.58. Revenues rose 38.9% year/year to $1.05 billion versus the $1.00 billion consensus. The company sees 2004 EPS of $2.70-2.74 versus consensus of $2.57 on revenues in excess of $4.5 billion versus consensus $4.38 billion.

Media. . . . The New York Daily News reports a big run-up in travel marketing expenses at Barry Diller's Internet empire, InterActiveCorp, has investors running scared. According to the article, shares fell $1.19 yesterday, or nearly 4%, to $31.06 after the company said it spent more than expected on drawing more transactions for their travel Web sites. That has Wall Street whispering that InterActiveCorp could get swallowed up. "This could easily be taken over by eBay, Google or Yahoo," a source for the article said. "If I were Barry, I'd be worried about that."

Clear Channel reported earnings of $0.16 per share, ex items, $0.02 better than the consensus of $0.14. Revenues rose 10.7% year/year to $1.97 billion versus the $1.84 billion consensus. Company "expects that operating income will increase in the low double digits on a percentage basis and earnings per share will increase in the high teens to low twenties on a percentage basis for the full year of 2004".

Marvel Enterprises reported earnings of $0.27 per share, $0.06 better than the consensus of $0.21. Revenues rose 40.0% year/year to $122.3 million versus the $109.1 million consensus. The company now sees 2004 EPS of $0.89-0.94 versus the Reuters Research consensus of $0.88.

Network Equipment . . . Smith Barney reiterates their Buy rating and $34 target on Cisco ahead of 3rd quarter results on May 11. The firm sees the enterprise end markets as improving and thinks that the company's service provider biz should snap back in the quarter. Also, while it's not unusual to see a book-to-bill in the 0.90-0.97 range in the seasonally-weak April qtr, firm expects a book-to-bill around 1.0 due to the strong demand trends they saw in March and April, which should materially improve visibility into the seasonally-strong July quarter. Overall, firm thinks the quarter, conference call, and guidance will be supportive of the stock.

Research In Motion and Vodafone announce plans to offer the BlackBerry wireless solution to mobile professionals in Australia. Operating on Vodafone's GSM/GPRS network, BlackBerry will provide integrated access to email, data and phone applications.

Banc of America says that given the dramatic pullback in Communications Equipment stocks as well as the improved fundamental outlook for 2004, they view valuations in the group as attractive. Firm remains most positive on Cisco, Nokia, Juniper, Research in Motion, UT Star Telco, and Foundry.

Lucent was awarded $150 million contract from U.S. Cellular.

Needham reiterates its Buy and $3 target on Corvis after it reported 1st quarter results on Friday. The company is emerging from a turnaround, including the recent purchase of Broadwing. The firm says Corvis, recognizing the need to evolve its business in a new direction while also preserving the largest test bed for its gear, seized the opportunity to buy Broadwing for a fraction of revenues out of a distressed sale in 2003. The firm sees significant upside heading into a cyclical upturn. The co confirmed that the sales pipeline is growing driven by a revamped sales force. The firm expects the co to report news of VoIP launches and possibly initial packet-switched voice customers this Spring. Meanwhile, the co discussed potential government contracts.

Semiconductor Equipment . . . Susquehanna says they remain cautious toward the semi equipment sector as the company's approach what they believe will be a cyclical peak in semi growth in the next several months; firm says a combination of decelerating semi growth and aggressive capacity expansion in late 2004 will lead to a difficult environment for equipment stocks. Firm downgrades Lam Research, United Micro, and Varian Semi to Net Neutral from Continued Net Positive as a result of their increasingly cautious stance toward the semi equipment sector, and also downgrades MKSI and Teradyne to Net Negative from Continued Net Neutral, saying these company's lack some of the defensive characteristics they consider important during a cyclical downturn.

Taiwan Semi, the world's leading contract microchip maker, is likely to increase capital spending this year -- perhaps by another 10%-- to boost production capacity in the face of surging demand. TSMC had forecast $2 billion in capital spending this year, up from $1.2 billion in 2003 and the company's chairman told investors Friday that even more investment could be needed to address an expected capacity shortfall this year. Asked about that outlook, an investor relations official with the company, said at a JPMorgan investor conference on Monday that TSM was "likely" to increase its capital spending budget. According to the Reuters report, TSMC sent shares of semiconductor equipment firms surging last year when it first announced plans to boost capital spending in 2004.

United Micro, the world's second-largest contract chip maker, will increase its $850 million budget for spending at its Singapore plant this year -- if it can get hold of production equipment in short supply. Chris Chi, president of United Microelectronic Corp's Singapore business, UMCi Ltd, said on Tuesday the co planned to raise production of semiconductors at the plant to above an original target of 10,000 wafers a month by the end of the year. But, like other chip makers, Chi said UMCi's ability to ramp up production to meet booming demand for chips for gadgets such as mobile phones was limited by shortages of semiconductor production equipment. He said that was particularly true of lithography equipment for mapping out electronic circuits on silicon wafers, which has to be ordered a year in advance. UMC's lithography supplier is Dutch company ASML Holding.

Semiconductors . . . AmTech maintains their Buy rating on Marvell Tech, saying the stock has been under pressure due to the overall weakness in technology as well as concerns over insider selling; firm notes that the company's top two senior execs still own more than 10% of the co each, and from a fundamental standpoint, they find several data points in MRVL's favor: 1) strength at WDC, 2) stronger market in notebooks in 2004, and 3) new design wins in Prestera switch ICs.

Software . . . The Marker.com, an Israeli technology website, reports that Microsoft CEO Steve Ballmer said he assumes that in the foreseeable future, when the co puts its legal wrangles behind it, it will share the cash it built up with shareholders possibly through dividends or by repurchasing shares, or in some other fashion. Ballmer also said Google's Gmail service may come complete with security problems and compromise the users' privacy, and said "you'd be surprised to hear how close we are to Google in our search abilities."

CNET News reports Red Hat on Tuesday plans to announce its first version of the open-source operating system for desktop computers. Red Hat initially won't tackle the entire desktop software market, aiming instead for corporations whose employees need only basic computing features such as word processing and Web access. Red Hat's primary target has been Unix running on higher-powered networked computers called servers. But with its Red Hat Desktop product, the co directly aims for Microsoft and its Windows stronghold.

RedHat held a press conference in London this morning and issued a press release announcing the launch of the RedHat Desktop.This is a long-term positive as it represents a first step in broadening RHAT's opportunity to leverage its Linux leadership on the server and open-source software development strategy to deliver an alternative desktop solution to enterprises globally. Analysts do not anticipate RHAT will generate a material amount of client revenue in 2005 as the product is expected to sell on a subscription basis at $5 per month per user with a 50 user minimum. The product will be generally available May 15th and initially sold directly through RHAT and other partners but the company has not signed any OEM agreements at this time. RHAT indicated it is in discussions with several large enterprises and government entities to begin pilot projects with the RedHat Desktop. A key differentiator in RHAT's client strategy is manageability of the client environment. The RedHat Network has the potential to significantly reduce the overall support costs of a client environment through automated provisioning.

Piper Jaffray comments on Macrovision's 1st quarter results, which confirm the firm's belief that industry trends in DVD-to-VHS protection and FlexNet are improving. While Macrovision will not play in all areas of content protection, the co's current and upcoming product offerings will result in the re-emergence of a growth story. The co indicated that SafeDVD, which the firm believes represents the largest potential market opportunity for Macrovision, is being production tested by a major film studio this quarter and should have revenue by 4th quarter.

Wedbush Morgan downgrades Siebel to Hold from Buy and cuts their target to $12 from $18 after the co announced that Michael Lawrie will replace Tom Siebel as CEO; although Lawrie appears exceptionally well qualified, firm says he is new to SEBL and they envision a number of near-term transition issues over the next several quarters, such as: 1) firm has some concern that Mr. Siebel, despite remaining Chairman and a full-time employee, will almost inevitably scale back his role; 2) SEBL remains dependent on big-deals, and they worry that less involvement from Mr. Siebel could put some rev at risk from big deals lost or downsized; 3) key SEBL execs will now report to Lawrie, and firm would not be surprised to see some executive-level turnover (forced or voluntary); and 4) firm sees some mgmt and strategy changes, although none are immediately in the works.

Analysts viewing the news of Tom Siebel stepping down from the CEO role as a neutral to positive change from a corporate governance standpoint. Michael J. Lawrie will succeed Mr. Siebel as a CEO effective today, which does raise some questions with skeptics noting that the CRM industry must be facing some unusual challenges for management to bring in someone from outside for the position. Michael J. Lawrie was most recently SVP and Group Executive, Sales and Distribution, at IBM and led the company's global operations, responsible for delivering more than $80 billion of annual revenue. JP Morgan out noting the resignation is not entirely unexpected noting the transaction could potentially make Siebel a more attractive acquisition candidate as it introduces a new perspective to the operating committee, separates the founder from the CEO position and is a step toward Mr. Siebel playing a smaller role going forward.

Oppenheimer upgrades Macrovision to Buy from Neutral and raises their target to $23 from $22 following stronger than expected 1st quarter results and raised guidance; firm also says recent price weakness in the stock offers a compelling entry point, and also cites improved visibility in the company's ELM businesses.

Lehman upgrades Adobe to Equal-Weight from Underweight and raises their target to $46 from $36 after the company raised 2nd quarter guidance; firm says they are gaining more confidence that the new pricing structure that the co adopted on its Creative Suite launch and the last Acrobat upgrade will allow these products to have a longer and more profitable tail than initially expected.

Barron's Online highlights Macromedia, a co known for its products such as developer tools like Flash, which make it easier to design and develop dynamic web content. Sales of those tools remain strong as customers buy upgrades, such as its software package called Studio MX, as well as sales of new products like training software eHelp. "Macromedia repackaged Studio MX, so you get more bang for your buck," says Ed Bierdeman, an analyst at Moors & Cabot, who rates the stock Buy. Macromedia expects its nascent business and consumer products, such as a version of Flash used on cell phones, to double in the FY ending in March, from about $37 mln in F04. Mr. Bierdeman sees these products, such as eHelp, growing to about 20% of sales in F05. With its core business strong and new products growing, Mr. Bierdeman now expects Macromedia to earn 85 cents per share next year, well above the consensus of 68 cents before the co announced results. The stock now fetches a modest 1.4x Macromedia's projected long-term annual earnings growth rate. And the shares are at a discount to its historic 5-year multiple of 45.3x forward earnings. According to the article, staple products like Flash are selling well, and cell phones could grow into a big market as Macromedia broadens its customer base beyond creative professionals.


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