Thursday, November 09, 2006


Semi Scorecard:

The CSCO semiconductor food chain should trade higher in reaction to the co's strong qtr and higher Q2 guidance, notably NETL (62% rev exposure), IDTI (20-24% rev exposure), BRCM, MRVL, ALTR, XLNX, PMCS and CY. In addition, both CY and BRCM have their analyst days today. BRCM will be the one to watch as the stock has been getting accumulated ahead of their analyst day in anticipation of encouraging commentary on market trends. We also note the co provided a nice surprise to analysts last year at their analyst day when they noted their markets remain strong and revs should be at the high end of previous forecasts. As a result, we would expect the stock to be very volatile in today's trading given the CSCO results and the potential for the co to make commentary about their guidance heading into Q4. CY typically recaps their guidance given on their earnings call and does not provide any updated guidance.

BofA raises their tgt on CSCO to $30 from $27 and sees more scope for upward revision to these above-Street ests, given that they continue to view sales headcount growth as the key to the stock. Firm was most impressed with better growth in Europe and Japan, with the important U.S. market still solid. Firm views the better than expected CSCO results and guidance as positive to its EMS partners: Celestica (CLS), approx 9% sales, high-end routers, security and optical, Jabil (JBL), approx 9% sales, mid-/high-end routers and switches, storage, and Solectron (SLR), 16% sales, mid/high-range switches, high-end routers, including CRS-1. They also believe CSCO results is positive for Flextronics (FLEX) who recently announced meaningful new wins at CSCO. Firm believes CSCO could become a top 10 customer and greater than 10% of sales for FLEX when the new programs are fully ramped.

Friedman Billings notes NVDA launched its new G80 high end GPU yesterday, on schedule and on time for both holiday sales and for the January Vista launch. Firm believes G80 sales will be a positive for NVDA's January and April quarters, due to both the upcoming Vista launch as well as due to their view that ATI/AMD is not likely to have a competing product available until March, leaving the high end of the market solely to NVDA during this time. Firm notes NVDA reports after the close tonight and expects meaningful upside to consensus ests.

UBS cuts their tgt on AMD to $23 from $26 saying AMD's slowing momentum on servers in Q3 has negative implications for gross margins, leading them to reduce their 2007 EPS est to $1.23 from $1.36. Furthermore the firm says AMD's focus on Dell (DELL) is leading to shortages in the channel which happen to be more profitable than its O.E.M business.

Courtesy of

P.S. Despite CSCO's positive earnings, I'm not feeling bullish this morning.

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