From Briefing.com: 6:13PM Monday After Hours prices levels vs. 4 pm ET: Selling remains the theme of the day in the after hours session, where the S&P futures, at 1083, are 3 points below fair value, and the Nasdaq 100 futures, at 1396, are also 3 points below fair value. Traders continue to fret over the sharp move higher in bond yields - which has all happened even before the FOMC has raised rates (probably in June or August).
The below table lists the evening's relevant news items, as well as the stocks' reactions.
After Hours Mover % Change Move Reason for Move Angiotech Pharmaceuticals (ANPI) unch Medical device maker reports a Q1 (Mar) net loss of $0.07, $0.04 worse than the Reuters Research bottom-line estimate; Revenues checked in at $11.9 mln, which includes $4.5 mln of royalty revenues primarily from the company's partnership with Boston Scientific (BSX) for the Taxus drug-eluting stent; Device already claims 70% of the US market Consolidated Edison (00) -3% Utility company cuts its FY04 (Dec) EPS forecast to $2.50-2.70 from $2.60-2.80 citing the dilution from a 14 mln share offering; Con Edison recently (Apr 30) filed its first electric rate increase in 10 years, which sent shares near 52-week highs; ED current sports a 5.7% annual dividend yield EDS (EDS) -1% Second-largest US computer-services provider said it's evaluating various alternatives - including reducing the amount of its dividend by two-thirds or issuing more than $1 bln in new shares - in order to maintain its credit rating; Management has been in discussions for more than a week with Moody's over its current debt rating, which sits one notch above junk status; EDS also disclosed in today's 10-Q it expects FY04 (Dec) EPS of $0.20-0.40 (vs $0.50-0.60 earlier) Pacific Sunwear (PSUN) +3% Teen-based retailer reports a 90% year/year increase in Q1 (Apr) EPS to $0.19 (consensus of $0.16) and a 24% rise in sales to $245.1 mln (consensus of $243.4 mln); Based on its Q1 earnings results and a completed $50 mln stock repurchase plan which reduced share count by nearly 3%, management raised its full year EPS forecast to $1.31 from the current consensus of $1.26, which assumes same store sales growth of 5% for the balance of the year Plains Exploration & Production (PXP) +3% E&P oil company will be added to the S&P 400 Mid-cap Index on May 14 as the company will be acquiring fellow S&P 600 Small-cap constituent Nuevo Energy (NEV) in a deal expected to close on or about that date; Internet Security (ISSX) will be taking PXP's place in the S&P 600; Software stock actually trades higher by 1% tonight
Tomorrow, there is very little going on in terms of earnings or economic reports. Texas Instruments (TXN) will be having a financial analysts' meeting, but that's about the extent of the events calendar.
For more detail on these, and other developments, be sure to visit our Stock Market Update and Daily Sector Wrap. -- Heather Smith, Briefing.com
Close Dow -127.32 at 9,990.02, S&P -11.59 at 1,087.11, Nasdaq -21.89 at 1,896.07: Concerns over rising interest rates led to yet another disappointing session, which saw the major averages close with sizeable losses after failing at a barrage of technical levels... Specifically, the Dow and the S&P 500 traded below their respective ranges for the year, the Dow traded below its 200-day simple moving average and the psychologically-significant 10,000 mark, while the Nasdaq closed below the 1900 level for the first time since November of 2003... While fears of rising interest rates are not new at this juncture and the major averages have slipped roughly 5.5-9.5% over the last month as these concerns became more prevalent, the market used today's session as yet another opportunity to widen its year-to-date declines... While Briefing.com thinks such fears are justified, we think that from a longer-term view, the market is over-anticipating the probable increase in rates, as discussed in today's The Big Picture column... To that effect, while rates need to rise over the year ahead to about 2 1/2% in the short end, with the 10-year yield of roughly 5-5.5%, this increase is not dramatic enough to curtail the very strong momentum in the economy...
Accordingly, long-term investors should maintain their conservative/defensive stock positions, despite the fact that the near-term may bring more downside... Today's decline, in the meantime, was broad-based and sponsored by the majority of sectors, including the influential internet, networking, telecom, biotech, drug, banking, REIT, oil services, transportation, iron & steel, coal, and utility groups... Leadership to the upside was limited to the gold group, while the semiconductor sector showed relative strength, like it did on Friday...
The bond market was little changed, with the 10-year note closing down 5/32, bringing its yield up to 4.79%...NYSE Adv/Dec 354/3098, Nasdaq Adv/Dec 716/2512
2:41PM Infineon names Wolfgang Ziebart new CEO - Dow Jones (IFX) 12.52 -0.23: Ziebart is scheduled to start as of Sept 1, at the latest, according to Dow Jones.
10:05AM Sierra Wireless probing last week's low of 21.27 (SWIR) 21.31 -1.48: -- Technical -- Stock has held on the initial retest (session low 21.26) but if a sustained break is seen, the next support is at its 200 day simple mov avg of 20.68.
8:53AM Flextronics and TeliaSonera sign 5 year deal to expand partnership (FLEX) 16.02: Co and TeliaSonera AB announced an agreement to expand the scope of their relationship. Under the terms of the five-year deal, FLEX will become the main supplier of onsite installation and maintenance services for TeliaSoneras' fixed network customers.
12:53PM Monolithic Systems (MOSY) 6.69 -0.08 Monolithic Systems Technology develops and licenses 1T-SRAM memory technology to semiconductor and systems companies for development of system-on-chip applications. The company reported Q1 results after the close on Thursday. Pro-forma EPS was $0.01 on revenue of $4.503MM (-43.1% Y/Y) vs. Reuters Research consensus at $0.02 on $4.84MM.
The following table shows sales, gross margin and Y/Y change in gross margin by revenue segment. Segment Revenue ($ in MM) % Sales Y/Y Growth Gross Margin Y/Y bps change in GM Product 0.162 4% (70.2%) 7.4% (1,778) Licensing 2.988 66% (33.8%) 87.4% 108 Royalty 1.353 30% (52.6%) 100.0% 0 Total 4.503 100% (43.1%) 88.3% 126 Gross margin increased 126 bps Y/Y to 88.3%. Operating margin declined Y/Y to (2.2%).
Guided for Q2 revenue of $4-5MM based on booked business under contract, and operating expenses of $3.8-4MM, exclusive of legal fees. Current litigation includes suit against Synopsys (SNPS 26.58 -0.12) for breach of contract, and complaint by UniRAM for patent infringement.
MOSY announced, on February 23, a merger agreement with SNPS. SNPS terminated the agreement to acquire MOSY for approximately $432MM in cash and stock (approximately $346MM net of cash) on April 16. MOSY filed suit in the Delaware Chancery Court to force SNPS to complete the merger agreement, or provide for monetary damages. Trial date is scheduled for July 6-13, 2004.
UniRAM Technology delivered a complaint against MOSY, on April 1, alleging trade secret misappropriation and patent infringement. UniRAM asserted that MOSY provided trade secret information to Taiwan Semiconductor Manufacturing in 1996 to 1997, and that MOSY improperly obtained unspecified UniRAM trade secrets from TSMC in an unknown manner.
MOSY shares are, based on our inverted EVA/DCF model, priced for sustained 35% revenue growth from C06 assuming 50% operating margin; making MOSY a $150-160MM annual revenue company at the end of the forecast period.
The following table shows price multiples and Y/Y growth rates for MOSY compared against the semiconductor group. Company *P/SG **P/OPG P/S Y/Y Revenue Growth TTM 2004E 2005E TTM 2004E 2005E Monolithic Systems Tech (MOSY) 10.5 314.7 13.2 9.4 7.5 (30.6%) 15.7% 25.0% Artisan Components (ARTI) 2.3 32.4 6.7 6.1 4.9 70.7% 29.3% 23.6% Virage Logic (VIRL) 2.3 (50.6) 3.8 3.1 2.5 (6.7%) 27.7% 25.7% Semiconductors 2.5 31.0 4.2 n/a 18.1% n/a *P/SG Ratio: Normalized Trailing 12 month (Price / Sales) / Growth ratio as of May 7, 2004. **P/OPG Ratio: Normalized Trailing 12 month (Price / Operating Income) / Growth ratio as of May 7, 2004.
Low visibility near-term into the revenue stream but expectations priced into shares may prove to be modest. The amount of memory embedded on a chip is expected to continue to increase over the next few years, from over 50% of the die area to over 80% by 2008 and over 90% by 2014. Management pegs the addressable royalty opportunity in excess of $1B by 2005.
MOSY is steadily increasing the number of licensees which include Applied Micro Circuits, Broadcom, Conexant, Fujitsu, LG Electronics, Matsushita Communications, Motorola, Philips Semiconductors, pixelWorks, SANYO, SigmaTel and Sony. Design wins generally take several quarters to generate royalties.--Ping Yu, Briefing.com
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