InterDigital Inc (IDCC)

[nieves]

Briefing.com Introductory Service: Story Stocks
Apr 29, 2003 (Briefing.com via COMTEX) -- Story Stocks
Updated: 29-Apr-03
Quotes at time of story, top stories today: (ERICY 11:38) (FMKT 10:53)
11:38 ET ******
Ahead of the Curve: Ericsson (ERICY) 8.74 +1.29 (+17%) Fighting the last war. That is what investors buying Ericsson are doing today. Yes, there is good news in the report issued today - no financing needs required, deeper cuts coming, gross margin improvements - all good things.
But from a higher perspective, what's the point? If we came to you and said: "Here's a company you should look at. It has sequential and yearly revenue declines of about -30%, hasn't made a profit in eight quarters, has an operating margin of -9%, compared to -8% a year ago, is cutting staff drastically, is booking orders lower than last year, and operates in a market with a 10% projected growth rate" what would you say?
Most people would probably say something like "what airline company are you talking about?" The only thing that keeps people interested in Ericsson, and other companies in the wireless industry, is the legacy investment premise. Ericsson, along with Nokia, Qualcomm, and Motorola, were the beneficiaries of one of the greatest secular trends of all time - the advent of cellular phones. Year after year, handset sales exceeded even the loftiest growth expectations by wide margins. Capacity was the issue at most handset manufacturers for most of the 1990s decade. These stocks were great performers even before the bubble ever started. Ericsson was just in the right place at the right time and the rode the wave correctly - for as long as it lasted.
But everything that drove handset sales in the past 10 years is gone. The 3G "broadband on a cell phone" promise has fizzled. Nearly everyone who is going to buy a cell phone already has one - in the US. There are growth possibilities in the third world, but it increasingly looks like China will choose to develop their own systems, even though it will take longer, and selling to less developed countries makes for a slow sales ramp. An investment in Ericsson today is a lot closer to a turnaround premise than anything like a growth premise. From that perspective, an investment in Ford looks more appealing than one in Ericsson right now - for long term investors. We suspect investors in Ericsson would cringe at the idea of investing in Ford, but without any emotional attachment to either company, the situations are similar. (There is still a lot of short term trading opportunity in Ericsson and other fallen giants, but the Ahead of the Curve column follows a long term approach.)
A lot of people are coming back to Ericsson on the theory that it is "the next Ericsson." We think it is time to look elsewhere for the next wave of great five year investments. Over a year ago, we argued that financial stocks and healthcare stocks would lead the market going forward, not tech stocks. This earnings season is confirming that, particularly for financial stocks. There are a lot of opportunities there. Healthcare stocks are headed there, but are not as far ahead as financials. In addition, "applied-technology" stocks look interesting. An extremely good example of one is Exult, profiled one today's Stock Brief
page. If the only place you have been looking for revived signs of growth are areas where growth was once fantastic - like Ericsson - it is time to broaden the vision. - Robert V. Green, Briefing.com
11:08 ET ******
Technical Levels: So the Nasdaq continues to favor this overhead in the general vicinity of 1461 to 1468. In fact, the index posted a healthy 28-point gain yesterday, and despite the intraday extension, still managed to close at 1462. Now from a strictly technical perspective, this area approximates the mid-January highs, and also matches with former trendline resistance going back sixteen months. Yet from a more practical standpoint, that 1468 level also got to the heart of
yesterday's review
.
The relevant passage from that review
yesterday
follows: "As one final point, also note that simply because you would conventionally expect additional time before a break above 1468 does not mean it has to play out that way. This current leg higher has been unusually strong, and if the index would begin to favor that area on a closing basis over the next several sessions -- i.e. test that level and hold towards it -- the upside risk likely outweighs any potential downside. Recall we have established an intermediate-term target in the vicinity of Nasdaq 1510 to 1521."
At any rate, this first chart is an hourly chart of the Nasdaq in which each bar on the chart represents the opening and closing levels for each sixty-minute time frame. The most obvious take away once again pertains to the index' 20-period exponential moving average. Recall the break below that line contributed to our consolidative immediate bias back on
April 24th
. Then
yesterday
, the subsequent break back above that 20-period ema contributed to our reversion back to the predominant bullish bias.
So looking back, the index carved out a relatively minor 36-point 'consolidation phase' over the course of two sessions. Now whether that amounts to 'real' consolidation or a head fake probably hinges on your preferred time horizon. In either case, two days was enough for the index to observe our second support point at 1431 (the index technically bottomed at 1432), and also placed the Nasdaq within striking distance of our target support point at 1423.
To read the remainder of this review -- which addresses one approach to this early sell pressure -- please click
here
to visit Briefing.com's Stock Brief page. -- Mike Ashbaugh, Briefing.com
10:53 ET ******
FreeMarkets Inc. (FMKT) $6.36 -0.46: FreeMarkets (FMKT) reported earnings after the close of the market last night, surpassing Rueters Research estimates of a loss of $0.10, posting a loss of $0.06. Revenues were down 20% from the same quarter as last year, and in line with consensus estimates of $34.5 mln.. The Company also provided guidance for next quarter and CY03, and is expecting a loss of $0.06 per share and revenues of $36 mln to $37 mln. The street was looking for a loss of $0.03 and revenues of $36 mln in 3Q03. For the CY03, FMKT expects to earn $0.02 per share on revenue of $155 mln which is better than the consensus estimates of a loss of $0.02 and $152 mln in revenue.
The Company, like most software companies is looking for the sales cycle to push more sales to the end of quarter / end of the year. FMKT also expects its new product line to add depth to the pipeline and sees the long term renewal rate of 75% as reasons to be positive about the upcoming quarters. Although the weighted sales cycle is quite common, many investors will likely say that the expectations are getting worse in the near term and possibly too lofty down the road.
Management looks for the top line to drive EPS higher in 2H03, and sees little in the way of cost cutting. The optimism is a result of what management termed the robust pipeline of new products and improved execution. Analysts were hoping that costs cutting would provide some savings, and thus improve margins. In the most recent quarter, gross margins slipped to 47% from 56% in the same quarter last year.
This weaker near term guidance has brought the sellers back to FMKT, as the stock dropped $0.32 to $6.50 in early trading. Briefing.com believes that sellers will remain present until FMKT shows that it can bring in more than the 3-5 new customers its currently averaging and grow revenues in the process. Investors should also look for margin improvement before committing new capital to FMKT. One potentially good sign of improvement is that the Company is hiring in the Asian market.
The once high flying internet B2B play has come back down to earth amid a challenging technology environment. IT spending has been well below historic levels, and management sees little signs of improvement. There remains opportunity for FMKT if there is a general recovery in IT spending, but until then Briefing.com suggests that investors look for more consistent performers.--Brian Bolan, Briefing.com
09:21 ET ******
Morning Set-Ups : The market started the week on an impressive note and although volume was low, market breadth statistics were strong. For this morning, the pre-market indicators suggest that we will see some follow through interest in early dealings. Overseas markets are firmer as is the Dollar while the Treasury market is on the defensive
S&P 500 Levels: From a chart perspective the index is working on taking out resistances at a long term
trendline off the Aug 2000/March 2002 highs (approx 918 this week, yesterday's high 918.15), last week's high (919.74) and its 50 week ema (921.50). Failure on a short term basis would bring initial supports at 914/913.50 and 910 into play. Resistances beyond these levels are at 925 and 927 with sustained follow through setting the stage for a run at the upper boundaries of the now nine month trading range (Jan high first up at 935).
Dow Industrial Levels: First resistance for the Dow is in the 8500 area with a penetration allowing for a run at the top of its one monthtrading range highs
between 8520/8526. If a break is seen, the next resistance is in the 8505/8560 area. On the downside short term supports are at 8460 and 8440/8432.
Chart Watch: Hewlett-Packard (HPQ
)-- edged above its week long trading range on an intraday basis on Monday but was stymied once again near its 50 day averages (16.2) which has played an important role on several occasions over the last several months. Watching for sustained penetration which would argue for a run at resistance at 16.85/16.94 and 17.17/17.24. Stock to watch that have displayed upside momentum and are now hovering just off multi-month highs include: FWRD, KNGT, HITK, NARA, SEPR, SRE, COLM, KRB, BMY.
200 Day Watch: Stocks closing above this widely followed moving average included: ELX, XOM, KRB, BMY, LNC, MAS, JP, DOV. Ending below this average were: NEM, CAM, SU.
Send comments or suggestions to -- Jim Schroeder, Briefing.com
08:56 ET ******
Page One - Ahead of the Open: Stock futures are slightly higher on a continuation of the momentum from yesterday. Earnings reports this morning are mixed, but the overall earnings picture is still positive.
Through last evening, first quarter reports were in from 342 of the S&P 500 companies, and the market-capitalization weighted gain is 13.3%. Reports from smaller companies appear to be not quite as good, particularly for some of the smaller technology companies. Nevertheless, so far it is a good quarter.
There are not a lot of major reports impacting the market this morning. After the close yesterday, semiconductor maker Altera (ALTR 16.50) reported earnings of $0.08 per share, a penny ahead of expectations on a respectable 13.4% increase in revenue from the same quarter last year. They also guided revenue estimates slightly higher for the second quarter. Not bad, but the stock has rallied 40% since early March, so there was some profit taking on the news in after hours trading. ALTR is indicated to open about $0.50 lower.
This morning, Dow 30 component and chemical maker DuPont (DD 41.73) posted operating earnings seven cents ahead of expectations, but warned that earnings for the second quarter would be in the mid-50's as opposed to the average Wall Street forecast of $0.63 per share, due to high energy costs. It may be down today. Steady-as-a-rock McGraw-Hill (MHP 59.25) beat by a penny on a meager revenue increase of 1.9%. Drug maker Bristol-Myers Squibb (BMY 24.36), which has been beset by accounting issues, posted first quarter earnings of $0.39 per share. That beat by a penny on a slim 1.1% revenue gain but was down from $0.45 per share last year. None of these reports will have broad market impact.
An upgrade of note: Dow 30 component McDonald's (MCD 16.93) was upgraded by Smith Barney Citigroup to in-line from underperform with a 12-month price target of $18. The stock has bounced off its low of 12.12 of early March.
The focus may soon shift from earnings reports to the economic data. On Friday, the April employment data are due. A modest decline in payrolls is expected by most economists. This release has the potential to move the market substantially - either way. For a detailed forecast, please see our
link
off the Economic Calendar. -- Dick Green, Briefing.com


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