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From Briefing.com: 5:43PM Swing Trader: AFFX, OXY : -Technical- A modest bounce in the markets Tuesday to relieve its short-term oversold condition from the last few sessions. The Dow finished at 10405 +114, SPX 1201.57 +10.88, and Nasdaq 2069.89 +24.69. Market Breadth was positive as Advancers outpaced Decliners 2.6 to 1 on 3.7 Up to Down Volume. New Highs also exceeded New Lows by 3.9 to 1. Majority of sectors were up today. The only laggards were led by Energy in the Oil Services (OSX -2.09%), Natty Gas (XNG -1.55%) and Oil (XOI -1.10) groups as crude corrected under the $60 level....(continued)

4:16PM Mattson cuts Q2 bookings guidance (MTSN) :Co revised its Q2 bookings guidance to approx $27 mln due to changes in timing of customer orders for advanced products. Prior bookings guidance was $37-$42 mln. Revenue and gross margin guidance for the period remain unchanged.

4:10PM Magma Design and SMIC announces partnership (LAVA) :Magma Design (LAVA) and Semiconductor Manufacturing Int'l Corp (SMI) announce a formal partnership between the two co's. SMIC's Design Service Division is adopting Magma's integrated RTL-to-GDSII design product for its ASIC design projects, as well as the SiliconSmart products for characterization and model creation of libraries and macros.

4:09PM EXFO beats by $0.01; mid-point of AugQ EPS guidance slightly below consensus (EXFO) 4.51 +0.26:Reports Q3 (May) earnings of $0.03 per share, excluding non-recurring items, $0.01 better than the Reuters Estimates consensus of $0.02; revenues rose 28.0% year/year to $26.2 mln vs the $24.6 mln consensus. Co guides for Q4, sees EPS of $0.00-0.03 vs. $0.03 consensus; sees Q4 revs of $23-26 mln vs. $25.66 mln consensus.

4:33PM Advanced Micro Devices (AMD) 17.23 +0.58: The battle between Advanced Micro Devices and Intel is reminiscent of the long-standing conflict back in the 1800's between Alexander Hamilton and Aaron Burr - two of the most influential leaders in early American history. In 1804, the men finally met in the most famous duel in our history, which ended with Burr shooting Hamilton. The moral of the story, even though Hamilton died the next day in great pain, he was remembered as the father of our monetary systems and one of the greats of the Revolutionary period. While Burr, who was indicted but never prosecuted, lived he was regarded as a scoundrel. Depending on which side of the chipset you sit on will determine which company is the hero and which one is the scoundrel in this story.

This long-standing battle between Goliath-like Intel and David-like AMD ignites those types of feelings. Tuesday, Advanced Micro Devices fired a shot across Intel's bow filing an antitrust law suit in US Federal District court. The claim was filed in the District of Delaware where cases typically have to go to trial in 18-months. But in a case of this magnitude it could take more time. Intel has 30 days to respond to the claim which alleges, it has "unlawfully maintained its monopoly in the x86 microprocessor market by engaging in worldwide coercion of customers from dealing with AMD. It identifies 38 companies that have been victims of coercion by Intel – including large scale computer-makers, small system-builders, wholesale distributors, and retailers, through seven types of illegality across three continents."

While it's not illegal to be a monopolistic, it is if the company has acted illegally to maintain its position. Antitrust cases are notoriously hard to prove. The most notable and most pertinent to this case is the Microsoft/Sun Microsystems suit that went on for years. AMD said it filed suit not for its benefit, but to removed Intel's "choke hold" over the industry "giving consumers freedom of choice and the benefits of innovation." The latter point is necessary as AMD needs to show consumer harm to prove its case. Further, in order to prove Intel maintained its monopoly AMD will have to prove it kept it from competing in the marketplace. The complaint details coercive acts by Intel on computer manufacturers, system builders, distributors, and retailers against doing business with AMD. The claim outlines illegally inflating computer prices, limiting product choices for businesses and consumers resulting in an illegal monopoly.

AMD does has one ruling on its side. The Japanese Fair Trade Commission on March 8th found Intel violated antitrust laws in Japan. The FTC forced Intel to remove incentives and clauses in contracts restricting Japanese computer makers from using other companies' semiconductors. While a case in Japan does not show precendent, it does make Intel's practices (i.e. contracts etc) a matter of public record, therefore will be of interest in AMD's case. There were no monetary damages.

The complaint mentioned several companies including NEC, Fujitsu, IBM, Gateway, Dell, Apple, Sony, and HP, which AMD hopes will testify to Intel's practices. These companies are caught in the middle, facing their biggest supplier, which has direct control over already slim profit margins. These allegations, while surprising to most consumers, are well known in the industry. Unfortunately for shareholders, unlike the Burr/Hamilton duel don't expect a quick resolution. If the Microsoft case is any indication, this battle is likely to be drawn out and expect Intel to fight vigorously to defend it practices. If Intel looses it could impact the customer loyalty Intel relies on. Yet even if AMD waves a victory flag, Intel has a considerable arsenal to fight back. ---Kimberly DuBord, Briefing.com

3:26PM Sovereign Bancorp (SOV) 22.40 +0.96: Despite underlying economic uncertainty and interest rate challenges, Sovereign Bancorp, one of the largest U.S. savings and loan institutions, issued upside guidance for the fiscal second quarter. The Philadelphia-based company expects EPS of $0.49-0.50, ex-items, versus the consensus estimate of $0.45, as operating metrics for the company continue to improve. Sovereign's Chairman and CEO, Jay Sidhu, stated that "while the flat yield curve remains challenging, modest net interest margin pressure should be offset by strong mortgage banking revenue, strong commercial loan growth, continued strong credit quality and continued expense control."

Given the continued flatness of the yield curve, though, concerns about profit margins are apt to continue to torment the banking stocks for the time being. If nothing else, the narrowing yield spread will keep earnings growth from being all that it can be since banks aren't likely to be as accommodative with their lending policies as they would be with a steeper curve. Accordingly, multiple expansion will be harder to come by as concerns about growth rates fester in the face of the flattening of the yield curve and the Fed's tightening activity.

While bank stocks in general have been pressured by underlying macro-conditions, Sovereign has relied on its diverse operations and balanced revenue stream to sustain growth. Following the ongoing wave of consolidation in the industry, the company has grown from a local institution to an $8 billion regional power since its inception in 1987. The company has shown resilience in changing business climates and has proved successful in expanding its consumer base through acquisition, as consolidation efforts within the industry have pressured firms to offer more comprehensive services and seek growth in alternative markets. Through a broader product line and greater service range, Sovereign has been effective at reducing its dependence on any one business segment, a key factor for its recent success.

As focus has shifted toward strategic growth initiatives and improving operations, the company's substantial earnings power and strengthening balance sheet have positioned it for the challenges ahead. However, like other banks, the underlying concerns for the company remain to be interest rates and economic growth. While growth has been steady and inflation fears have been calmed, uncertainty in the Fed's tightening policy and volatility in the yield curve have fueled caution for the sector. For SOV, though, its current valuation multiple of 15.8x trailing earnings, relative to the average PE level of 11.8x over the past five years, does not speak to the looming economic uncertainty.

As Fed policy becomes more clear and the yield curve begins to retract from its flattening trend, the value proposition for the stock, and the banking industry, will appear more favorable. ---Richard Jahnke, Briefing.com

12:06PM Apollo Group (APOL) 77.05 -3.18: The grades are in for Apollo Group. While the company's earnings history has been validated by continued high marks, the results for the fiscal third quarter were relatively strong. The company recorded Q3 EPS of $0.77 on $619 million in revenues versus the consensus estimate of $0.74 on $625 million, as profits soared 40% year/year. Additionally, revenues climbed 24.6% from $497 million in the year ago period.

Despite the positive results for the most recent quarter, the company stated a conservative outlook for the fiscal fourth quarter, rendering concern for a deteriorating growth outlook. The company expects Q4 EPS of $0.67 on $605-620 million in revenues versus the consensus estimate of $0.67 on $623 million. For FY05, EPS is expected to be $2.48, ahead of the consensus estimate of $2.45.

Given the company's astounding track record of above average growth, investors have been accustomed to recurring upside surprises. However, as Apollo Group appears to be reaching a point of maturation, results have pointed towards a deceleration in growth rates. In particular, focus has been on the growth rates of enrollment and selling and promotional expenses.

Total enrollment for all of Apollo's programs rose 23% to 295,500 students over the year ago period. Concurrently, on-line degree enrollments increased 41% to 154,500, versus the consensus estimate of 42.4%, while on-ground enrollment climbed 9% to 141,000, versus expectations of 9%. While enrollment for both on-line and on-ground degree programs continues to display relative strength, the deceleration of growth rates over previous quarters have impeded the company's top-line prospects. Furthermore, the outlook for the company is clouded by rising student acquisition costs. Selling and promotional expenses for the fiscal second quarter were reported at $118.2 million, marking a 14% increase over the year ago period. The impact of rising lead costs and lower lead-to-student conversion rates has pressured margins and has shifted strategic initiatives towards expanding on-line services, where lower overhead costs benefit margins.

As the operating environment for Apollo Group continues to change as a result of heightened regulatory scrutiny and competitive pressures, it has become more difficult and costly to retain critical students, employees, and faculty. With such firms as Corinthian Colleges (00C0), Career Education Corp. (CECO), and ITT Educational Services (ESI) vying for market share, the company's ability to successfully manage its operations has become ever critical. As such, the company's concerns are centered around driving enrollment growth, lowering student acquisition costs, and avoiding legal and regulatory issues, which have plagued the industry in recent months.

Although Apollo Group continues to demonstrate relative strength, increased competitive pressures, softening enrollment growth and margins do not warrant the size of the valuation premium. The company currently trades at 73.1x trailing earnings, relative to the average PE level of 49.3x over the past five years. Although an impressive growth story over the past few years, the current risks surrounding the industry have clouded prospects for the company, and should be taken into consideration. ---Richard Jahnke, Briefing.com

8:57AM Page One - About Oil Again : Stocks showed good resilience again yesterday. Despite oil prices closing above $60 a barrel, the S&P lost less than 1 point. This morning, it is all about oil again. Oil prices are down about $0.60 and trading just below $60 a barrel. Stock futures indicate a solid up open.

The S&P futures suggest an up open of about 4 points. If that gain holds, that means that over the past two days, the S&P will have managed a net increase while oil prices were essentially flat. This reflects some underlying optimism. There is some buying after last week's 2% drop in the S&P. The index is in the upper portion of its six month trading range and holding up well ahead of earnings season. The market has done very well considering that this is a period when warnings are heavy and that often generates more market turbulence than has been seen this month.

The only economic release today is consumer confidence data at 10:00 ET. There are no major earnings reports, but Paychex had a good earnings report, reflecting the improved labor market. Target gave an upbeat assessment of June sales, saying that same store sales would be better than expected. AMD has filed an antitrust suit alleging an illegal Intel monopoly.

The S&P index is about where it was six months ago. During that time, earnings have risen significantly. That has resulted in improved stock valuations. Oil prices are clearly a restraint on stocks, but if there is any decline in oil prices, the stock market would benefit. Our view is still neutral, but the continued decent earnings trends are building the case for higher year-end stock prices. --Dick Green, Briefing.com

9:38AM BMC Software (BMC) UBS upgrades Reduce to NEUTRAL. Target $14 to $17. UBS upgrades BMC based on the growing possibility of a sale of the co. Over the past 6 months, firm believes events in the systems mgmt sector have started to point to accelerated consolidation, w/ the co the most likely of top franchises to attract interest. However, they do not project the co's SoP value at a big premium to current trading levels and continue to recommend a cautious approach to the co's fundamentals and the weak outlook regarding organic growth.
9:37AM Central Parking (CPC) Bear Stearns upgrades Peer Perform to OUTPERFORM. Target $16. Bear Stearns upgrades CPC on valuation, following the recent sell off on the news that the co terminated discussions regarding a possible sale. Firm believes this suggests that the offers coming in were far less than CEO Monroe Carell was expecting. Given Mr. Carell's age (73) and his concentrated holdings (he and his family own more than 30% of the shares), as well as the recent loss of mkt capitalization, firm believes some liquidation/sale scenario is still likely. Absent a drastic deterioration in the operating business, they see limited downside from here.

9:36AM Polycom (PLCM) Thomas Weisel downgrades Outperform to PEER PERFORM. Thomas Weisel downgrades PLCM based on intensifying competition in the co's core videoconferencing market (~75% of revenue, including endpoints and bridges), which they think will stunt PLCM's growth prospects and pressure margins in the absence of an acceleration in demand (which firm is not seeing and does not expect). While the competitive winds are still gathering strength, and they do not expect to see a big impact on PLCM's Q2 results, they think the writing is on the wall and that Street numbers for FY05 and FY06 are at risk. Firm lowers their FY05 and FY06 ests.

9:36AM Whiting Petroleum (WLL) AG Edwards downgrades Buy to HOLD. A.G. Edwards downgrades WLL as the co has revised its production guidance for the second time this year, causing concerns that organic growth will be lackluster in 2005. Although the co expects to double its operated rig count in 2H05, firm says that projected second half volumes suggest minimal organic growth.

9:35AM DURECT Corp (DRRX) Oppenheimer initiates BUY. Firm believes the sum-of-the-parts value is worth more than what investors are currently allocating to the shares. They view DRRX as an undercovered story in the pain and drug delivery spaces. They believe that success of any one of its products could go a long way in justifying this enterprise value, and say that all of the co's products have an advantage over currently available technology due to improved delivery routes.

9:35AM Ariad Pharm (ARIA) Oppenheimer initiates BUY. Oppenheimer initiates ARIA based on their conviction in the development/regulatory outcome and commercial potential of AP23573, the co's lead drug candidate for the treatment of sarcoma. Firm believes Phase II data presented at the ASCO annual meeting in May clearly demonstrated '573's activity in sarcoma, placing it at the forefront of potential new treatments for this significant unmet medical need that afflicts approximately 12,000 people per year in the US. They think the co represents a compelling opportunity for risk-tolerant investors looking to increase exposure in the small-cap biotech space.

9:34AM Kerr-McGee (KMG) Lehman Brothers upgrades Equal-weight to OVERWEIGHT. Lehman upgrades KMG based on valuation. Since June 1, KMG has appreciated 4-5% vs 12-13% appreciation in peers, and the S&P 500 that has stayed largely unchanged. While firm still has concerns, the relative underperformance vs the large cap universe since the beginning of June makes the risk/reward more balanced than before.

9:33AM ATI Tech (ATYT) Lehman Brothers upgrades Equal-weight to OVERWEIGHT. Target $12 to $14. Firm believes that ATYT has bottomed out, and that the stock should see upside given the release of new high-end products, gross margin expansion, and revenue growth.

9:32AM Semtech (SMTC) Am Tech/JSA Research downgrades Buy to HOLD. Target $22 to $19. Although firm believes that ultimately the Xemics acquisition adds valuable new product families to SMTC's long-term product portfolio for growth, the near-term picture is surrounded by uncertainty as well as increased execution risk.

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