From Briefing.com: 6:09PM Thursday After Hours prices levels vs. 4 pm ET: Selling in the tech sector is still the name of the game as investors have been dissatisfied with a batch of better than expected earnings reports. Semiconductor, computer hardware, and software companies alike have failed to please the market despite results that were generally sound. Presently, the S&P futures, at 1423, are 5 points below fair value and the Nasdaq 100 futures, at 1448, are 14 points below fair value.
The below table lays out the evening's most notable reports and the stocks' reactions:
After Hours Mover % Change Move Reason for Move Cree (CREE) +5% After raising its Q3 (Mar) outlook on Jan 15, semiconductor maker tops the revised Reuters Research consensus EPS estimate by $0.02 on revenues that rose 28% to $77.1 mln; Briefing.com predicted such upside in our Earnings Preview on In-Play, a Platinum product; Company issues better than expected Q4 (June) top and bottom line guidance IBM (IBM) -3% Tech bellwether delivers Q1 (Mar) profits that increased 16% and matched the market expectation; Revenues rose 11% to $22.25 bln (consensus of $21.93 bln), however, revenues would have been up 3% excluding the impact of currency; Sales in services - IBM's largest division - minus foreign currency were up only 1%; IBM has been trading below its 50-day moving average for over a month McData (00C0) -6% Storage networking company lowers its Q1 (Apr) sales forecast to $94-104 mln from $108-115 mln; Cites a slower pace of economic recovery than it had expected and lengthening sales cycles for major purchases; McData also warned for Q4 (Jan) and the combination of the two has kept selling pressure constant; Rival BRCD is down tonight 2% Netflix (NFLX) -10% On-demand movie rental service meets the consensus bottom-line estimate in its Q1 (Mar) report; Stock sells-off, though, as the rest of the news was known in the company's Apr 1 preannouncement; Netflix also issued in line Q2 (June) revenue targets; Stock has been range-bound since it split on Feb 13 PMC-Sierra (PMCS) -8% Semiconductor name shows upside to the Q1 (Mar) Reuters Research EPS and revenues estimates after guiding higher on Jan 20; Says Q2 (Jun) revenues should increase 5-8% sequentially on its conference call (in line with the consensus estimate); Stock tumbles on expectations for even higher numbers Siebel Systems (SEBL) -6% Software vendor beats the Q1 (Mar) consensus EPS estimate by a penny on in line revenues; License revenues came in at $126.8 mln versus management's earlier range of 'approximately $127 mln'; On call, management puts EPS and revenues in line with Street estimates and license revenues at $120-140 mln; As this range is roughly flat with Q1, SEBL succumbs to selling; ORCL & PSFT are also weak tonight Sun Microsystems (SUNW) -3% Despite guiding lower for Q3 (Mar) on Apr 2, network computer maker still misses Street estimates; Company continues to be pressured by the introduction of Linux (freely available operating system software) and the move to servers running Intel-compatible chips and Microsoft software
Tomorrow, the market will hear from more technology companies with Nokia (NOK) topping the list. Economic data will also flood the market with March Housing Starts & Building Permits, March Industrial Production & Capacity Utilization, and the preliminary April Michigan Consumer Sentiment index on the docket.
For more detail on these, and other developments, be sure to visit our Stock Market Update and Daily Sector Wrap. -- Heather Smith, Briefing.com
4:55PM PMC-Sierra guides Q2 revenues in-line (PMCS) 15.62 -1.00: -- Update -- On call, management says Q2 (Jun) revenues are expected to increase 5-8% sequentially, implying a range of $82.6-85.0 mln. The Reuters Research consensus is for revenues of $83.59 mln.
4:31PM PLX Tech beats by a penny (PLXT) 11.01 -0.65: Reports Q1 (Mar) earnings of $0.02 per share, $0.01 better than the Reuters Research consensus of $0.01; revenues rose 36.5% year/year to $11.6 mln vs the $11.0 mln consensus.
4:24PM McDATA cuts Q1 sales forecast (MCDTA) 6.28 -0.41: Co now expects Q1 rev of $94-$104 mln, vs previous guidance of $108-$115 mln. Co cites "less robust than expected early 2004 purchase patterns by customers and end-users, some of which may relate to a slow pace of economic recovery and seasonal softness in IT spending in Q1". However, with gross margins expected to be on track with previous guidance and operating expenses expected to be lower than previously forecast, co expects pro forma EPS to be ($0.01)-$0.02, vs previous guidance of $0.00-$0.02.
4:17PM Kopin misses by $0.04, beats on revs (KOPN) 6.35 -0.19: Reports Q1 (Mar) loss of $0.05 per share, $0.04 worse than the Reuters Research consensus of ($0.01); revenues rose 23.9% year/year to $22.4 mln vs the $21.5 mln consensus. Co's Q1 net loss primarily reflects lower initial yields associated with the transition from co's legacy monochrome micro displays to new color filter cyber display products and additional marketing and technical support associated with increased color display activities.
4:14PM Advanced Energy reports, guides Q2 below consensus (AEIS) 19.67 -1.14: Reports Q1 (Mar) earnings of $0.18 per share, which excludes approx $1.0 mln or $0.03 in pre-tax gains resulting from sale of certain marketable securities and sale of co's thermal control biz, may not be comparable to the Reuters Research consensus of $0.18; revenues rose 86.1% year/year to $104.5 mln vs the $98.0 mln consensus. Co also guides, sees Q2 EPS of $0.20-0.25, vs the R.R. consensus of $0.28, and revenues of $107-115 mln, vs an estimate of $107.5 mln.
4:11PM IBM reports in line with consensus (IBM) 93.97 +0.27: Reports Q1 (Mar) earnings of $0.93 per share, in line with the Reuters Research consensus of $0.93; revenues rose 10.9% year/year to $22.25 bln vs the $21.93 bln consensus.
4:07PM Transmeta beats by a penny, ex items, issues Q2 guidance (TMTA) 3.40 -0.02: Reports Q1 (Mar) non-GAAP loss of $0.11 per share, excluding net effects of non-cash charges and credits of $3.8 mln, $0.01 better than the Reuters Research consensus of ($0.12); revenues fell 13.3% year/year to $5.2 mln vs the $5.5 mln consensus. Co also guides, sees Q2 non-GAAP net loss of $0.12-0.13, vs the R.R. consensus of ($0.11).
4:07PM PMC-Sierra beats by $0.02 (PMCS) 16.62 -0.55: Reports Q1 (Mar) earnings of $0.06 per share, $0.02 better than the Reuters Research consensus of $0.04; revenues rose 11.4% year/year to $78.7 mln vs the $78.4 mln consensus.
4:03PM Cree beats by $0.02, guides Q4 above consensus (CREE) 21.60 -0.16: -- Update -- Reports Q3 (Mar) earnings of $0.20 per share, $0.02 better than the Reuters Research consensus of $0.18; revenues rose 28.0% year/year to $77.1 mln vs the $75.9 mln consensus. Co sees Q4 EPS of $0.20-0.22 on revs of $83-85 mln vs the Reuters Research consensus of $0.18 & $79.9 mln respectively.
4:02PM Molex beats by $0.02, guides Q4 above consensus (MOLX) 30.22 -0.71: Reports Q3 (Mar) earnings of $0.24 per share, $0.02 better than the Reuters Research consensus of $0.22; revenues rose 28.4% year/year to $569.2 mln vs the $556.9 mln consensus. Co also guides, sees Q4 EPS of $0.27-0.29, vs the R.R. consensus of $0.25, and revenues of $600-610 mln, vs an estimate of $576.9 mln.
Close Dow +19.51 at 10,397.46, S&P +0.67 at 1,128.84, Nasdaq -22.68 at 2,002.17: Participants were grabbing at straws through the entirety of today's session, as they continued to reassess the risks associated with the rising interest rates and the benefits of a clearly accelerating economy... Accordingly, the early optimism over the generally better than expected earnings reports was short-lived and the major averages spent much of the morning trending lower, with the Nasdaq spearheading the decline and dipping below its 50-day simple and exponential moving averages at 2013 and 2015, respectively... The semiconductor sector led the decline of the tech-composite, which was striking in the face of a batch of better than expected earnings reports from the likes of AMD, LRCX, CY, and FCS... The broader market experienced added selling pressure when the Nasdaq dipped below the psychologically significant 2000 mark... Yet, the tech composite's ability to lift above the 2000-mark incited buying in the blue-chip averages, which ended up lifting into positive territory and closing in the green, while the Nasdaq also closed well off its session lows...
Hence, technical levels proved to be just as significant of market movers in today's session, as readjustments for the higher interest rate environment... Among the leaders to the upside were the real estate operations, drug, gold, oil services, and coal groups... Laggards of note included the internet, networking, semiconductor, software, telecom, storage, insurance, retail, and iron & steel sectors... This morning's economic reports were mixed... The Initial Claims for the week of 4/10 checked in at 360K (consensus 335K), although the higher than expected reading could prove to be an aberration....
The NY Empire State report came in undeniably strong at 36.1 (consensus 29.0) suggesting that the manufacturing sector continues to improve, while the Philly Fed Index at 32.5 (consensus 26.0) confirmed the same... Elsewhere, the bond market closed with the 10-year note down 8/32, bringing its yield up to 4.40%... NYSE Adv/Dec 1610/1710, Nasdaq Adv/Dec 1229/1986
12:35PM Advanced Micro Devices (AMD) 15.95 -1.17: After the close on Wednesday, AMD published Q1 EPS of $0.12 on revenue of $1.236B (+73.0% Y/Y) vs. Reuters Research consensus at $0.03 on $1.166B, driven by higher demand and ASPs (average selling prices) for both flash memory and microprocessors.
Flash memory sales increased 188.1% Y/Y to $628MM (51% of sales), paced by strong demand from Asia-Pacific and Latin America. Achieved operating profit of $14MM vs. a loss of $3MM in the year-ago period. AMD is ramping 110nm production for both Floating Gate and MirrorBit products.
Microprocessor revenue increased 21.5% Y/Y to $571MM (46% of sales), driven by demand for both Athlon and Opteron processors. Achieved operating profit of $67MM vs. a loss of $53MM in the year-ago period. AMD is ramping 90nm production for both .
Gross margin increased 731 bps Y/Y to 37.8%, primarily due to mix shift in favor of the flash memory business, higher ASPs (average selling prices) across both product lines and improving manufacturing yields. Operating margin improved Y/Y from a loss to 5.0%. This compares against over 31% for Intel (INTC 26.80 -0.57).
Guided for Q2 revenue to be approximately flat Q/Q due to seasonality, implying Y/Y growth of approximately 90%. Consensus EPS is at $0.02 on $1.166B.
AMD shares are, based on our inverted EVA / DCF model, priced for sustained lower to mid 20% revenue growth assuming steady Y/Y improvement to 20% operating margin. This compares against lower 20% growth and mid to upper 30% operating margin for INTC.
The following table shows price multiples and Y/Y growth rates for AMD compared against the semiconductor components group. Company *P/SG Ratio **P/OPG Ratio P/S Y/Y Revenue Growth TTM 2004E 2005E TTM 2004E 2005E Advanced Micro Devices (AMD) 1.0 (21.4) 1.5 1.2 1.1 22.6% 42.0% 10.8% Intel (INTC) 3.4 16.8 5.7 5.2 4.6 17.8% 14.0% 11.1% Transmeta (TMTA) 87.2 1.9 34.3 10.3 3.5 (27.8%) 231.7% 197.4% Sun Microsystems (SUNW) 1.1 (50.8) 1.3 1.4 1.3 (8.1%) (3.5%) 10.1% Atmel (ATML) 1.8 (45.5) 2.6 2.0 1.7 11.5% 28.8% 14.0% STMicroelectronics (STM) 2.0 63.2 2.8 2.3 2.1 14.6% 21.5% 12.9% Broadcom (BRCM) 4.5 (22.7) 8.0 5.3 4.5 48.7% 50.4% 16.6% Intersil (ISIL) 3.4 32.5 5.3 5.4 4.6 21.0% 18.5% 16.8% Texas Instruments (TXN) 3.1 41.6 4.7 4.0 3.5 17.3% 27.2% 14.6% Semiconductor Components 3.1 53.1 4.9 13.1% *P/SG Ratio: Trailing 12 month (Price / Sales) / Growth ratio as of April 08, 2004. **P/OPG Ratio: Trailing 12 month (Price / Operating Income) / Growth ratio as of April 08, 2004.
AMD shares are down less than 1% since the Q4 review (Story Stocks, January 21, 2004) when we advised investors to hold off on AMD shares given that the company will be challenged to sustain sales growth and margin momentum beyond C05 given the competitive environment, noting that competitors are transitioning to advance production technologies, including 300mm and 90nm nodes, while most of AMD's production is based on 130nm and older technologies.
Potential for significant upside to shares should management achieve operating margin above the 20% rate reflected in our model, all else equal. Management claims the company's APM (automated precision manufacturing), a proprietary suite of over 250 fab automation and optimization technologies, reduces time to mature yield on advance process technologies by over 60%; indicated 130nm is mature and company will begin production on 90nm at a higher level of productivity than 130nm.
We would expect the combination of ramping production on 110nm and 90nm and APM to help offset some but not all of the differential in yield and cost efficiencies between AMD and competitors. We would hold off until management delivers evidence of sustained growth and operating margin at least in the upper teens.--Ping Yu, Briefing.com
10:02AM Apple Computer (AAPL) 28.72 +2.08: Apple Computer published Q2 results after the close Wednesday. The innovator of the Apple and Macintosh personal computers and digital consumer electronics reported EPS of $0.12 on revenue of $1.909B (+29.4% Y/Y) vs. Reuters Research consensus at $0.10 on $1.811B.
Results reflect company's success to expanding product and services portfolio and distribution channels. iPod, retail and software comprise an increasing percent of sales, are sources of margin upside and are helping to reignite interest in the Apple name and Mac products.
The company shipped 749K Macintosh units (+5% Y/Y) and 807K iPods (+909% Y/Y). iPods remain the best selling MP3 player with demand continuing to exceed supply. The company claims a greater than 29% unit share of the MP3 player market (greater than 54% revenue share). Management expects to achieve better demand / supply balance by Q4. The following table shows unit shipments, revenue, and Y/Y change by product line for Q2. Product Units in '000s Y/Y Growth Revenue in Mil Y/Y Growth iBook 201 51% 223 48% iMac 217 (15%) 252 (17%) Power Mac 174 12% 349 19% PowerBook 157 (5%) 336 (5%) Macintosh 749 5% 1,160 6% iPod 807 909% 264 752% Peripherals & Other HW 272 47% Software & Other 213 33% Total 1,909 29% Americas Macintosh units increased 7% Y/Y to 361K (48% of units); revenue increased 29% Y/Y to $881MM (46% of sales). Europe units increased 4% Y/Y to 187K (25% of units); revenue increased 33% Y/Y to $449MM (24% of sales). Japan units declined 29% Y/Y to 76K (10% of units); revenue declined 21% Y/Y to $173MM (9% of sales). Retail units increased 67% Y/Y to 70K (9% of units); revenue increased 97% Y/Y to $266MM (14% of sales). Retail traffic remains strong at 5.7MM or 5.8K visitors per store per week vs. 4.4K in the year-ago period.
Gross margin declined 58 bps Y/Y to 27.8%. Operating margin, excluding extraordinary items, increased 332 bps Y/Y to 3.2%.
Guided for Q3 EPS of $0.12-0.13, including $0.02 in restructuring charges on $1.925B (+24.6% Y/Y) vs. consensus at $0.09 on $1.815B. Gross margin is expected to be 28%; operating expenses to be $480MM including charges and other extraordinary items.
AAPL shares are, based on our inverted EVA/DCF model, priced for sustained upper teens revenue growth assuming steady Y/Y improvement to upper single digits operating margin.
The following table shows price multiples and Y/Y growth rates for AAPL compared against the computer systems & peripherals group. Company *P/SG Ratio **P/OPG Ratio P/S Y/Y Revenue Growth TTM 2004E 2005E TTM 2004E 2005E Apple Computer (AAPL) 1.0 77.3 1.4 1.3 1.2 23.3% 22.6% 9.3% Dell (DELL) 1.6 20.2 2.2 1.8 1.6 17.1% 17.4% 15.3% Gateway (GTW) 0.7 (5.8) 0.6 0.6 0.5 (18.4%) (0.5%) 7.0% Sun Microsystems (SUNW) 1.1 (50.8) 1.3 1.4 1.3 (8.1%) (3.5%) 10.1% Computer Systems & Peripherals 1.0 18.9 1.4 10.2% AAPL shares have risen over 19% since the Q1 review (Story Stocks, January 13, 2004) when we said investments in R&D during the three year downturn to transform the company from a personal computer company to a provider of digital consumer electronics, and management's focus on developing opportunities within the consumer and higher education markets, and building distribution channels/relationships are beginning to pay off.
Shares remain attractively priced despite the 19% gain, reflecting uncertainty over whether the company will ultimately be successful in getting iPod customers to buy Apple PCs over lower-priced Wintel systems. Management is hearing anecdotal stories of iPods converting Wintel users to Mac.
Market valuation understates the company's strong intellectual property position, brand equity and operating assets. The company has a strong balance sheet with over $4.6B in cash and cash equivalents (47% of AAPL's $9.8B market cap), over $3B of net assets.--Ping Yu, Briefing.com
9:21AM Texas Instruments (TXN) 28.68: Texas Instruments posted Q1 results after the close on Wednesday. The leading designer and supplier of DSPs (digital signal processors), DLPs (digital light processing) and analog integrated circuits printed EPS of $0.21 on revenue of $2.936B (+33.9% Y/Y) vs. Reuters Research consensus at $0.21 on $2.895B.
Book-to-bill was 1.09. Pricing was generally trending higher across product lines. Company is looking to put through additional price increases.
Semiconductor revenue increased 37.9% Y/Y to $2.574B (88% of sales) due to demand for DSPs, DLPs, analog for wireless applications and high performance analog integrated circuits. DSP revenue increased 35% Y/Y, driven by OMAP application processors for wireless applications. Analog revenue increased 42% Y/Y, primarily due to high-performance analog, which increased 58%.
Sensors & Controls revenue increased 12.3% Y/Y to $0.284B (10% of sales) on demand across a broad range of products. E&PS revenue increased 2.6% Y/Y to $0.079B (2% of sales).
Gross margin increased 570 bps Y/Y to 45.0% on improved manufacturing efficiencies from higher capacity utilization. Operating margin increased 916 bps Y/Y to 16.1% as gross profit increased at a faster rate than revenue and operating expenses.
Guided for Q2 EPS of $0.23-0.26 on $3.085-3.325B (+31.9-42.2% Y/Y) vs. consensus at $0.23 on $3.064B. Semiconductor revenue is expected to be $2.650-2.850B; Sensors & Controls revenue to be $0.280-0.300B; and E&PS revenue to be $0.160-0.180B. C04 R&D is expected to be $2.1B, up from the prior forecast of $2.0B, and capital expenditures to be $1.3B, up from prior guidance of $1.1B.
Strong revenue growth and operating performance reflect improving industry fundamentals, TXN cementing its leadership position in DSPs (greater than 40% market share) and high-performance analog (greater than 25% market share), and management exercising firm control over operating expenses despite annual compensation adjustments. Results also reflect TXN's success in bringing to bear the company's strength in DSPs, analog, power management, connectivity solutions and advance manufacturing process technologies, allowing the company to deliver high performance products with enhanced power consumption profiles while improving manufacturing efficiencies.
Look for incremental margin improvement on the price hikes, and as the company ramps production and improves yield on advance production process technologies.
TXN shares are, based on our inverted EVA/DCF model, priced for sustained upper 20% revenue growth assuming steady Y/Y improvement to 25% operating margin.
The following table shows price multiples and Y/Y growth rates for TXN compared against the semiconductor components group. Company *P/SG Ratio **P/OPG Ratio P/S Y/Y Revenue Growth TTM 2004E 2005E TTM 2004E 2005E Texas Instruments (TXN) 3.1 41.6 4.7 4.0 3.5 20.9% 27.3% 14.6% Analog Devices (ADI) 4.4 28.2 8.4 6.9 5.7 22.6% 31.0% 21.0% Linear Technology (LLTC) 8.5 19.1 16.7 15.6 12.2 21.8% 28.7% 25.7% Maxim Integrated Circuits (MXIM) 7.0 21.0 13.0 11.2 8.9 10.7% 23.5% 26.0% Micrel (MCRL) 4.1 234.5 5.9 4.6 3.9 3.5% 27.5% 19.7% National Semiconductor (NSM) 2.9 33.5 4.6 4.3 3.5 10.2% 17.5% 22.1% Semiconductor Components 3.1 53.1 4.9 13.1% *P/SG Ratio: Trailing 12 month (Price / Sales) / Growth ratio as of April 08, 2004. **P/OPG Ratio: Trailing 12 month (Price / Operating Income) / Growth ratio as of April 08, 2004.
Quality name trading at a discount to peers on a forward basis and close to fair value on a discounted cash flow basis.--Ping Yu, Briefing.com
Market Data 
Markets 
AI
