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From Briefing.com: 7:40PM Tuesday After Hours prices levels vs. 4 pm ET: A positive after hours that has absorbed a number of corporate announcements very well. Presently, the S&P futures, at 1135, are 2 points above fair value, and the Nasdaq 100 futures, at 1480, are also 2 points above fair value. Most of tonight's developments have pertained to acquisitions, or news that a particular acquisition has closed.

The below table lists the most influential announcements of the evening.

Company Stock Move Reason for Move
Automatic Data (ADP) 43.57
-0.02
(-0.1%) Provider of transaction services to the financial industry acquires Bank of America's (BAC) US clearing and broker-dealer services division for an undisclosed amount; The transaction will not be immediately accretive to earnings, as Automatic Data said the deal will cut into earnings by about $0.01-0.02 in the first two years; Current Reuters consensus estimates call for EPS of $1.56 in FY04 (June) and EPS of $1.74 in FY05
CheckFree (00C0) 28.91
-1.07
(-3.6%) Provider of online bill payment services announces it closed on its $110 mln all cash acquisition of American Payment Systems, which was a subsidiary of UIL Holdings (UIL); The unit enables 7 mln households to pay for services in-person through a national network of about 10,000 retail/agent locations; For Q4 (June), CheckFree sees the purchase being mildly accretive to underlying earnings; Management now anticipates EPS of $0.28-0.30 (consensus of $0.29); Stock recently fell below its 50-day sma
Darden Restaurants (DRI) 21.73
+0.08
(+0.4%) Owner of the Red Lobster and Olive Garden restaurant chains turns in a 31% increase in Q4 (May) EPS, to $0.46 (consensus of $0.44), and an 11% rise in revenues to $1.36 bln (consensus of $1.36 bln); Company cited new restaurant growth at Olive Garden and Smokey Bones and the additional operating week in the quarter for the strength; For FY05 (Aug), Darden expects EPS of $1.62-1.68 (consensus of $1.63) and sees same store sales growth of 1-3%
Kosan Biosciences (KOSN) 7.00
-0.89
(-11.3%) Niche biotech name and its partner on KOS-862, Roche Holdings, make known they will initiate a phase II trial of the drug in prostate cancer, but halt a Phase II trial of KOS-862 in colon cancer; Kosan blamed a toxic build-up of the compound; KOS-862 is one of two anti-cancer drugs the company has in development; Drug was being evaluated in 3 different cancer indications; Stock has given back nearly half of its gains since early May
3Com Corp (COMS) 6.92
+0.06
(+0.9%) Mid-cap computer network company narrows its Q4 (May) GAAP loss to $0.05 on revenues that rose 5% to $183.4 mln (consensus of $174.2 mln); For Q1 (Aug), 3Com said revenues should be flat to slightly up sequentially (consensus of $176.02 mln); As a side note, the company said it would be replacing its EVP of Worldwide Operations (Dennis Connors) and CFO (Mark Slaven) as both executives decided not to relocate to headquarters per their one-year commuting agreement said
Tomorrow, the market will likely be grasping at straws (again) for direction with no economic reports on the agenda and only one earnings report (Federal Express). Fed governor Bies may provide the market something to go off of in late-day trading as he will be speaking on Risk Management.

For more detail on these, and other developments, be sure to visit our Stock Market Update and Daily Sector Wrap. -- Heather Smith, Briefing.com

7:50PM CRM: Salesforce.com prices 10 mln share IPO at $11.00 : The IPO prices above the upwardly revised range of $9-10 (up from $7.50-8.50). Salesforce.com (CRM) is a provider of application services that allow organizations to share customer information on demand. Deal is being led by Morgan Stanley

5:25PM Swing Trader: GS, BRCM, GPRO, MMM, MXIM, MERQ, FSH : A weak morning turned into a mid-day rally led by Semiconductors and Brokers. Seeing these 2 groups rally on slightly higher volume is a good sign. The market is starting...(continued)

4:03PM FSI Intl beats handily on EPS and revs; guides revs in line for Q4 (FSII) 7.30 +0.40: Reports Q3 (May) earnings of $0.13 per share, $0.13 better than the Reuters Estimates consensus of $0; revenues rose 87.1% year/year to $36.3 mln vs the $29.7 mln consensus. Co sees Q4 orders of $30-35 mln and revs of approx $33-36 mln, Reuters revs consensus is $35 mln.

4:00PM FSII prelim $0.13, vs $0.00 consensus; revs $36.3 mln, vs $29.7 mln consensus :

Close Dow +23.60 at 10,395.07, S&P +4.11 at 1,134.41, Nasdaq +19.77 at 1,994.15: Stocks opened lower, and the continued selling from yesterday took the S&P Index hit -5.93 by mid-morning...then, the market turned around, and the S&P Index rallied over 10 points and closed near its highs of the day...all of this developed on very little news......semiconductor and telecom stocks rallied, and got credit for jump starting the market, but the action today simply left the major averages little changed for the week following yesterday's weakness...
in essence, today was largely a reversal of yesterday, and maintains the trading range mentality that has been in place for weeks...in the Dow, Wal-Mart (WMT 54.06 -0.87) was lower after a judge ruled a class action lawsuit could proceed, and DuPont (DD 44.00 -0.35) was down after a Wall Street Journal article said the US government might investigate chemical price fixing...Morgan Stanley (MWD 52.15 +0.90) and Goldman Sachs (GS 90.65 +1.86) were helped by strong earnings reports...attention remains on the Fed policy statement a week from today, as the economic and earnings calendar this week remains light...that also defines volume, which came in at only 1.38 billion shares on the NYSE...

bonds were slightly lower today, and crude oil futures bounced back $0.48 to $38.25 after falling $1.23 yesterday...NYSE Adv/Dec 1675/1588, Nasdaq Adv/Dec 1733/1391

3:41PM Note from Wachovia Conference - CNXT

Conexant Systems (CNXT 4.38 +0.36) management discussed company's focus on broadband communications for the network enterprise and digital home markets.
Believes company can grow 15-20% annually based on company's diversified product lines.
Focused on improving profitability and delevering balance sheet; realigning overall operating expenses. Anticipate potential annualized savings of $40MM on cost of sales line and $40MM in operating expenses from workforce reductions, process realignments and price concessions from vendors including foundry partners.
Estimate total addressable market at $5.8B in 2004 growing at a CAGR of 18% through 2007 ($6.4B in 2005; $7.2B in 2006; and $8.1B in 2007).
Target operating model is 45% gross margin in competitive, high volume markets; operating expense of $100MM; minimum operating margin of 15% by Q4:04.
No change to guidance. Reuters Research prints Q3 consensus EPS at $0.05 on $312.60MM (+178.2% Y/Y); F04 EPS at $0.21 on $1.137B (+89.5% Y/Y).--Ping Yu, Briefing.com
CNXT is a bet on the rapidly growing markets for satellite set-top box and high-speed data access solutions. Shares trade at a discount to peer group and, based on our inverted EVA/DCF model, are priced for sustained mid teens growth from F06 assuming 15% operating margin.--Ping Yu, Briefing.com

1:13PM Note from Wachovia Conference - BRCM

Broadcom (BRCM 43.64 +0.99) management discussed convergence of voice, video and data driving demand for the company's products.
Stressed company's efforts to diversify away from traditional businesses and develop new markets over the past few years.
Estimated served available market at approximately $23B.
No update to guidance. Reuters Research prints Q2 consensus EPS at $0.32 on $635.12MM (+68.1% Y/Y); F04 EPS at $1.29 on $2.585B (+60.5% Y/Y).--Ping Yu, Briefing.com
BRCM competes in some of the fastest growing segments within the consumer broadband, wireless and networking markets. Shares trade at a premium to peers and, based on our inverted EVA/DCF model, are priced for sustained upper 20% revenue growth from F06 assuming 30% operating margin, which is materially above management's long-term target of 20% operating margin on 50% gross margin. Implied growth rate rises to lower 30% assuming 25% operating margin.

As we have previously commented, BRCM may be able to sustain the expected level of growth over the short-term given that the company's targeted markets are in the early stage of recovery/growth, and BRCM is beginning to harvest $6.3B of investments in 14 companies acquired between 2000 and 2003. But the sustained growth rate priced into shares exceed the level which current industry fundamentals can support over the long term on a purely organic basis.

Modest upside to the targeted 20% operating margin possible as management remains focused on containing operating expenses and the company has little variable compensation tied to sales, but difficult to sustain given competitive dynamics. We would continue to hold off in view of the steep premium valuation accorded shares, and the potential for near-term dilution given the company has returned to the acquisition path, acquiring three developing stage companies for over $215MM since February.--Ping Yu, Briefing.com
12:30PM Goldman Sachs (GS) 89.38 +0.59: Like a lot of brokerage firms, Goldman Sachs (GS) made the best of less than ideal conditions during Q2 (May). The company managed to grow earnings and revenues in a meaningful fashion - for its second best quarter in firm history - but still posted results that were down on a sequential basis. The rise in interest rates and the volatility in credit spreads hurt trading revenues some, and forced management to rely on investment banking and asset management for its strength.

Both segments achieved sequential growth, although investment banking was more robust with an increase of 25% to $953 mln. Financial Advisory nearly doubled its revenues from a year-ago, to $513 mln, as client activity picked up. Goldman retained its number one position in mergers & acquisitions, and was number two in worldwide equity offerings, public stock offerings, and IPOs.

As strong as both areas were, their combined revenues still accounted for a little over a third (at 34%) of total revenues ($5.51 bln versus the Reuters consensus estimate of $5.09 bln). Trading and Principal Investments saw its revenues decline 10% sequentially to $3.63 bln as fixed income revenues dropped 10% from Q1's (Feb) huge result. Revenues from equities were essentially unchanged with principal strategies - Goldman's proprietary trading unit - experiencing a significant sequential decrease across most regions and sectors. An unrealized $561 mln gain from the firm's investment in Sumitomo Mitsui helped offset the lackluster trading performance.

Goldman effectively traded margins for volumes in its trading group as clients were unwilling to make large trades in the less favorable stock environment. Commission volumes were higher, but profitability declined as a result. The effect was felt in Q2's return on equity, which shrank 260 basis points sequentially to 20.9%.

It would not be surprising to see the same trading trend in Q3 (Aug), as most clients take vacations and/or prefer not to play the thinly traded summer market. Q4 (Nov) should see a noticeable improvement in trading as more players make their way back to the action. Two (expected) Fed rate hikes should also be absorbed by the market then.

Briefing.com would continue to advise long-term investors to hold GS (the stock is a holding in our conservative portfolio) as it remains one of the best positioned names in the brokerage space. Goldman's undisputed leadership in investment banking should help it weather the downturn in the bond market. Prospects for near-term gains remain admittedly challenging with the market focused on interest rate concerns, but we believe shares will start to inch higher after the FOMC begins raising rates and client activity ramps. -- Heather Smith, Briefing.com

11:51AM Note from Wachovia Conference - EMC

EMC (EMC 11.01 +0.05) EVP Mark Lewis commented that management is seeing markets return to normalcy of 60% annualized storage capacity growth; expects 70% growth in 2004.
Company participates in a variety of software markets: backup and recovery is basic market; replication market seeing reasonable growth driven by security needs; virtualization is emerging, rapidly growing and critical market. VMWare acquisition allows customers to build virtual environment that enables grid computing / utility computing.
Strong in enterprise; moving into small and medium size businesses market with Dell relationship.
No update to guidance. Reuters Research pegs Q2 consensus EPS at $0.08 on $1.968B (+33.0% Y/Y); C04 EPS at $0.35 on $8.083B (+29.6% Y/Y).--Ping Yu, Briefing.com
11:28AM Note from Wachovia Conference - IDTI

Integrated Device Tech (IDTI 13.66 +0.16) management discussed company's focus on communications ICs for accelerated packet processing.
End-market demand accelerating. Communications infrastructure equipment account for approximately 70% of company sales; wireless networking/base station infrastructure contributes 23% of company sales.
Cisco Systems account for 20-25% of business; components are sold via contract manufacturers.
Fab light strategy with significant manufacturing/operating leverage.
Management expects new chips introduced a year ago for solving interchip communications protocol issues to generate several hundred million in annual revenue within a few years. Chips combine buffering, switching and queuing functions.
No update to guidance; company reaffirmed on June 2. Reuters Research prints Q1 consensus EPS at $0.09 on $102.17MM (+23.0% Y/Y); F05 EPS at $0.49 on $440.30B (+27.5% Y/Y).--Ping Yu, Briefing.com
10:09AM palmOne (PLMO) 29.36 +7.90: palmOne reported Q4 results after the close on Monday. The provider of handheld computing and communications devices posted pro-forma EPS of $0.32 on revenue of $267.346 (+23.1% Y/Y) vs. consensus at $0.13 on $254.13MM.

Demand continues to exceed supply for Treo 600s and screen supplies also remains constrained. PLMO has added additional display vendors and expects to make progress in filling backlog.

The company extended its lead in handhelds from a 57.7% share in Q3 to 60% according to NPD.

The following table shows sales, Y/Y growth and average selling prices by revenue segment. Segment Revenue
($ in MM) % Sales Y/Y Growth (%) Units (in '000s) Average Selling Price
Handhelds--Devices 175.6 66 (12) 949 185
Handhelds--Accessories & Services 16.3 6 n/a
Smartphones 75.4 28 n/a 151 499
Total 267.3 100 23.1 1,100 228
Gross margin increased 406 bps Y/Y to 30.6% despite average selling prices declining 1% Y/Y, reflecting tight cost control, improved supply/demand and product life cycle management, and contribution from smart phones. Operating margin, excluding extraordinary items and amortization, increased Y/Y from a loss to 7.0%.

Guided for Q1 EPS of $0.12 on $250-260MM (+40.9-46.5% Y/Y) vs. consensus at ($0.01) on $232.07MM; F05 EPS of $1.15-1.25 on $1.21-1.29B (+27.4-35.8% Y/Y). Gross margin is expected to be 28.5-29.5%; operating margin 5-6%. Management expects the company to ship 240-260K smart phones in Q1. Revenue mix between handheld and smart phones is expected to shift from 72% handheld, 28% smart phones in Q4:04 to approximately 50/50 by Q4:05.

The following table shows price multiples and Y/Y growth rates for PLMO compared against industry comps within the communications equipment and computer systems & peripherals groups. Company *P/SG Ratio **P/OPG Ratio P/S Y/Y Rev Growth (%)
TTM 2004E 2005E TTM 2004E 2005E
palmOne (PLMO) 0.8 (27.6) 1.4 1.0 13.4 35.8
Research in Motion (RIMM) 6.4 149.0 15.8 8.0 6.0 82.6 98.7 32.2
Nokia (NOK) 1.3 10.0 1.8 1.9 1.7 (1.6) (1.9) 8.1
Dell (DELL) 1.5 18.7 2.0 1.8 1.5 17.9 18.9 15.6
Communications Equipment 2.0 31.6 2.7 n/a (3.3) n/a
Computer Systems & Peripherals 1.0 17.6 1.5 9.5
Blended 1.4 22.7 1.9 4.5
*P/SG Ratio: Normalized trailing 12 month (Price / Sales) / Growth ratio as of June 18, 2004.
**P/OPG Ratio: Normalized trailing 12 month (Price / Operating Income) / Growth ratio as of June 18, 2004.

PLMO has risen over 85% since the Q3 review, Story Stocks, March 23, 2004, and continues to trade at a significant discount to peers. Shares, based on our inverted EVA / DCF model, are priced for sustained lower 20% revenue growth from F06 assuming 8-9% operating margin and aggressive working capital management.

Expectations are above management's near-term operating model but are likely to prove conservative over the long-term depending on smartphone market penetration, ASPs and PLMO's market share.

PLMO is partnering with carriers to drive the adoption of handhelds and smartphones which, according to IDC, is forecast to grow at a combined compound annual growth rate of 37% through 2008. PLMO ended Q3 with six carrier relationships and expects to close the calendar year with ten. Shipments are expected to increase as additional carriers come on stream. International markets represent significant growth opportunities with the U.S. market still accounting for approximately 62% of sales. Management remains focused on containing operating expenses and maintaining a stable supply/demand balance. We would continue to accumulate but expect shares to be volatile near-term.--Ping Yu, Briefing.com

9:05AM Ratings Briefing - QLGC : Merrill Lynch upgrades QLogic (QLGC 25.48) to Buy (volatility risk rating: high) from Neutral based on valuation, as it believes the recent decline (down over 50% YTD) more than reflects the risks of the business. Firm also says that last week's comments by Emulex at an investor conference likely led to reflexive selling of QLGC, and that the quarter appears to be tracking as key OEMs such as H-P and Sun appear to be pulling "normally" from their hubs; channel checks suggest flattish growth in the channel. Firm, therefore, believes that the OEM part of the business will drive growth this quarter, and that seasonality in H2/CQ4, which is usually strong, should start to weigh more on the share price. Target is $34.

What It Means:

At Merrill Lynch a Buy rating for a stock with a high volatility risk rating means expected total return (price appreciation plus yield) within the 12-month period from the date of the initial rating is 20% or more
Why the Call Should Move the Stock
Bullish endorsement of an out-of-favor stock from an influential firm should ignite buying interest among short-term accounts
With stock down 51% year-to-date, move to a Buy rating should prop up stock today as participants will be motivated by idea that stock has a favorable risk-reward relationship
IT sector known to do relatively well in a rising interest rate environment... upgrade at this juncture will help participants identify QLGC as a potential bargain hunting candidate that offers growth at a reasonable price
Firm's price target supports bullish thesis as it represents potential return of 33% from current levels
Sidenote:
Ratings distribution: 4 Buy; 4 Outperform; 11 Hold; 1 Underperform; and 1 Sell [source: Reuters Estimates]
QLGC expected to report fiscal Q1 (Jun) results around mid-July... current Reuters consensus EPS and revenue estimates are $0.36 and $130.35 mln
--Patrick J. O'Hare, Briefing.com

http://biz.yahoo.com/mu/story.html