csfb empfehlungen 13.12.00
proxicomi : Tech Group Hotbox/ 15.12.00
Jon Mano (212) 325-4530 www.tech.csfb.com
CTN 358.89 -18.94 -5.01%
Check out the Weekly Update on Page 4
Tech Group Hotbox
TANN Lowering Estimates, PT
HAR Lowering Estimates
INAP Raising Estimates
ORCL Raising Estimates
America Online (AOL-49.97-Cap $128.3B-Buy) Kiggen/Watters 212-538-8985/4357
FTC Approved AOL/Time Warner Merger
· Yesterday, the FTC voted unanimously (5-0) in favor of approving the AOL/Time Warner
merger, perhaps the most significant regulatory step in the approval process.
· The rest of the merger process should now unfold rapidly. By the end of December, we
expect approval from the FCC, and then the deal should close by early January.
· AOL and Time Warner are planning to host an analyst day on January 31, probably in New
York, to discuss the combined company?s financials and outlook.
· We believe the stock should trend up in the near-term as the regulatory overhang and close-date
uncertainty continue to lift. AOL is currently trading at 18.9x 2001 EBITDA and 15.8x
2002 EBITDA, a discount to its long-term EBITDA growth rate range of the mid-20%?s. We
reiterate our Buy rating.
i2 Technologies (ITWO-$51-Cap $23.6B-Strong Buy) Brent Thill 415-836-7712
Don?t Run for the Hills; i2 Still Owns The b2b Fortress
· ORCL's battering of ITWO on its conference call was expected. Claimed "competitive
displacements" of ITWO at Qualcomm, Teradyne, and Hayworth are not entirely true.
· Conversations with ITWO management after the conference call suggests ORCL sold the
suite of 11i solutions into these accounts (which includes supply chain), not specifically
supply chain apps. A couple deployments where indirect procurement deals, functionality
ITWO teams with ARBA to provide and not viewed as competitive. Management mentioned
they are still in good standings with these customers and will not be displaced.
· Motorola Wireless deal was prematurely released by ORCL. We believe this contract has not
yet been signed and the deal is still up for grabs. It appears that it is not a mammoth sized
deal (under $5M) and should be resolved over the next month. ITWO still remains in good
shape here given its success in Motorola's Semiconductor division.
· We have little evidence to suggest ORCL is picking up share against ITWO. ORCL is still
behind the pack by a number of laps (75 customers, does not break out license revenue) vs
market leader ITWO (950+ customers, $575M 12-month trailing license) and up and comer
MANU (not rated) (1,000+ customers, $91M trailing).
· Investors should use confusion to accumulate positions in ITWO.
International Business Machines (IBM-$92.06-Cap $162B-Hold)
Kevin McCarthy, 212-538-3809
G7 Mainframe and Enhanced Shark Begin Shipping
FY00E $4.35; FY01E $4.80; FY02E $5.25
· On Thursday, IBM began shipping its newest G7 version of the S/390 mainframe (now
branded the eServer z900), along with an enhanced model of its Shark SAN server.
· The z900 was designed specifically for e-business operations such as ASPs, ISPs and web
hosting companies. The server will run on an updated version of the old OS/390, but the
new 64-bit z/OS will not be available until late March. Until the release of z/OS, IBM will
promote Linux as the operating system of choice for system. Because of the late Q4
shipping date and the delayed arrival of the OS, we don?t believe the z900 will contribute
significantly to results until Q201.
· The newly enhanced features of the Shark include Peer-to-Peer Remote Copy (PPRC)
capabilities, FlashCopy and enhanced native fibre channel connectivity between Shark and
Sun, HP and Novell Netware, which will allow for increased interoperability among
heterogeneous SAN environments. Compaq will begin selling the Shark in late December
under the StorageWorks brand, per the IBM-Compaq storage agreement made in July.
· While these announcements are positive, they are inline with expectations. We continue to
believe that IBM cannot avoid deteriorating industry fundamentals this quarter, which extend
to the enterprise and commercial markets. As a result, we believe there is downside to the
Street?s $26.75 billion revenue expectation for Q4; we currently estimate $25.75 billion. Our
price target is $85.
Handspring (HAND-$51.81-Cap $7.8B-Buy) Cabi 415-836-7701/Sharma 415-836-8664
PC Industry?s Loss is Gain for Handspring and Mobile Devices
2000E CY($0.48) CY2001E ($0.33)
· Despite the Microsoft and PC industry woes, we are seeing signs of strength across the mobile
device industry and particularly for Handspring.
· Our recent channel checks indicate a strong holiday season for Handspring across all product
lines and the buzz around HAND's booth at the Palm Source conference confirms that the
springboard platform is definitely gaining momentum among the developer community.
· We believe that the mobile device market is partly to blame for sagging PC sales, as handhelds
represent a greater value proposition to consumers when compared with upgrading or replacing
a PC. Additionally, we believe that the significantly lower price of mobile devices compared to
PC's sits well with consumers in today's environment of economic uncertainty.
· We expect sales momentum to continue into next year. With a large pipeline of new modules
and form factors being developed, we believe the company can keep pace with the rapid
growth in the device space.
· Concerns regarding the Dec. 17th lock-up expiration and general market malaise have recently
put downard pressure on the stock. We believe however, that Handspring remains an
attractive investment, and that we are still in the very early phases of an emerging industry on
the path to rapid growth. We reiterate our BUY.
(ORCL-$27 1/2-Cap $162B?Strong Buy)
Laidley/Thill/Kluth (415) 836-7716/7712/7713
Picture Perfect Q2:FY01 Should Even Convert
FY01E $0.51, FY02E $0.63
· ORCL reported very solid Q2:FY01 results of $2.7
bill. and $0.11 versus our estimates of $2.7 bill.
and $0.10. Street consensus EPS was $0.10.
· Measured in constant dollars to adjust for a
negative 6.5% currency impact, YoY license
growth was an impressive 32% - the 1st time in 3
½ years that ORCL has produced 2 consecutive
quarters of greater than 30% license growth.
· ORCL?s Q2:FY01 product license revenue (in
constant dollar terms) was sensational - database
license grew 26% (vs. our 17% estimate) and
applications license grew 73% (vs our 50%
estimate) - the strongest YoY applications growth
since Aug '97, and the strongest back-to-back
quarter in the last three years.
· ORCL's vision of providing an integrated stack of
solutions is starting to take hold in the field. With
83 customers live on R11i and over 1,000
additional implementations underway, ORCL is in
the early stages of a widespread adoption cycle.
More than 3,000 customers are migrating to R11i.
· Large deals (>$500K) accounted for a larger
portion of ORCL?s total revenue in Q2:FY01 (45%
vs 36% in the year-ago quarter) driven by larger
applications deals. Mega deals ($10-30 MM) that
the Company has recently closed include CPQ
(largest Q2:FY01 deal) as well as the landmark
Covisint deal (closed for Q3:FY01 revenue).
· ORCL again delivered impressive margin
expansion in Q2:FY01 - 36% compared to 29% in
the prior quarter and 25% in the year-ago quarter.
· On the balance sheet, DSO was down one day
sequentially to 66 days while cash and short term
investment balance was down due to the
Company?s $5 billion stock buyback in the quarter.
· Accordingly, we are increasing our FY01 estimates
to $11.9 billion and $0.51 [from $11.8 billion and
$0.48], and FY02 to $14.1 billion and $0.63 [from
$13.5 billion and $0.57].
· Reiterate our STRONG BUY rating and 12-month
price target of $48, which suggests 75% upside
from current levels.
(MSFT-$55 1/2-Cap $307B-Not Rated)
Wendell Laidley, (415) 836-7716
MSFT Lowers Expectations for Dec Qtr,
Remainder of FY01
Consensus:FY00A $1.71, FY01E $1.81
· Yesterday after the close MSFT provided
revised guidance for the December quarter and
the remainder of FY01 (June).
· Q2:FY01 (Dec) revenue is estimated to be
$6.4-6.5 billion (5-6% reduction from prior
guidance) with EPS of $0.46-0.47. This
compares with First Call consensus of $0.49
and year ago results of $6.1 billion and $0.47.
· The Company guided to low double-digit
growth in Q3 and Q4 and revised FY01 (June)2
to $25.2-25.4 billion (5% reduction from prior guidance) and $1.80-1.82. This compares with
First Call consensus of $1.91 and FY00 results of $22.9 billion and $1.72.
· MSFT attributed the shortfall to weaker worldwide economic conditions (particularly in the
U.S.), slowing PC sales, reduced IT spending, and weaker consumer on-line services and
· Desktop application revenue (impacted by slower business & consumer PC growth) and
consumer revenue (impacted by slower subscriber growth & weaker advertising) are the
primary sources of weakness, while management suggested the Enterprise business and
Windows 2000 server are tracking to expectations.
· While the Company did anticipate a less robust business PC environment, the real surprise
stems from weaker consumer PC demand through the balance of the year. PC growth was
expected to be in the low-mid teens range but should now be lower by several percentage
· MSFT shares are current Not Rated by CSFB.
Software Strategy George Gilbert 415-836-7717
MSFT and ORCL Should Make Us Think Outside the Box
· Continuing one the themes coming from our technology conference, big doesn?t mean safe.
We continue to believe that spending on business PC software will be a low priority item for
customers faced with belt tightening.
· We also believe ORCL?s outstanding results carry many more messages, some less obvious
· At the most obvious level, 73% local currency growth in applications licenses means the
entire applications industry is healthy. It also means that ORCL 11i is riding the wave of a
new product cycle. Full suite sales are likely to see greatest success with mid-size
businesses, who typically can?t afford the higher maintenance costs of multi-vendor
· The B2B trend is your friend, not the debate over integrated suites vs best of breed. All the
hubub over integration vs best of breed is focusing on yesterday?s war. Focusing on this
misses the highest growth opportunities in inter enterprise systems (B2B) that are best
insulated from a potential slowdown and will last the longest. B2B systems are outside
ORCL?s current sphere of dominance and customers appear to be anointing new standards
· The application server market led by BEAS ($63.75, Strong Buy), although 1/10 the size of
the database market, is growing nearly 100% or 5X as fast. And it is reshaping the software
market by enabling a new generation of richer and richer Web applications, especially
Enterprise Portals, that integrate traditional applications such as ERP, other packages, and
legacy systems with newer self-service functionality. As the application server vendors
build, buy or license additional EAI and B2B integration technology, they become the new
hub of the software market.
Tanning Technology (TANN-$5.19 - Cap $111.5M-Buy)
Wolfenberger/Chubrik/Sturtz, 212 325 6714/6183/415 836 7711
Preannounces Quarter FY00E: $0.10, FY01E: ($0.10)
· TANN preannounced Q4 results below expectations of $16.0M rev & ($0.08) EPS vs our
$21.5M rev & $0.03 EPS ests. Addt?lly, co expects $6.8-7.3M after-tax chg: $3-3.5M
retention/employee related, $2.8M A/R write-off (e-market clients), & $1M net redux of
deferred tax asset.
· Issues three-fold: cautious IT spend by G1000 clients, funding issues at online-exchange
clients, & corporate restructuring at 2 large clients. Issues not dissimilar to concerns at more
front-end focused Internet Services firms.
· Although TANN not undergoing significant restructuring, company folding European & Indian
ops under one mgmt. Expect India to become integral piece to project delivery in FY01,
although still early. Believe offshore right strategy given evidence of industry-wide bill rate
· Despite no further guidance for FY01, we are reducing rev & EPS ests to $79M & $(0.10)
from $118M & $0.32, resp. Accordingly, lowering price target to $8 from $20 (2.5x F01
· Believe TANN has many enviable characteristics for the next wave incl. back-end
architects/engineers, G1000 client base, off-shore delivery & strong mgmt, although industry-wide
malaise leaving no one immune.
InterNAP Network Services (INAP-$14.875-Cap $2.6B-Buy) Todd Raker, 212.325.7156
Mgmt Increases 2001 Revenue Guidance, Reduces Cap Ex Expectations
2000E: ($0.72), 2001E: ($1.12)
· InterNAP hosted a conference call last night providing detailed 2001 financial guidance.
Bottom line, our revenue estimate moves from $202.0 to $220.0 next year. Expected
operating loss falls from $(1.35) to $(1.12). Mgmt reaffirmed that the fourth quarter will not
disappoint relative to Street estimates.
· Revised build out strategy focused on aggregation points and less full fledged PNAP?s
reduces cap ex requirements. Company now financed through to cash flow profitability.
EBITDA break even moves up 2 quarters. New $50 million line of vendor financing from
Cisco in place (total line is $100 million).
· Dot com fallout and degradation of macro environment is not significantly impacting current
business. Churn continues in line with historic levels (single digit customers dropping).
Company reaffirmed fourth quarter guidance.
· InterNAP will resell Akamai CDN service in a strategic partnership ? Akamai has increased
its bandwith commitment as a customer dramatically. VPN service offering should be
introduced in the second half of 2001.
· We reiterate our Buy rating. We continue to believe that InterNAP has a unique competitive
position and growing value proposition for customers. Reduced cash requirements and
revenue revision upward supports this thesis.
(HAR-$35.15-Cap $1.2B- Strong Buy)
Mark Hassenberg 212-538-4210
Slight Adjustment Of Estimates-Outstanding
Performance In A More Difficult Environment
Than We Anticipated
FY01E: $2.40, FY02E: $2.90
· Our estimates, above consensus, are likely to
prove to be too aggressive; we were at the top
of EPS range up 15-20% in FY01and 20-25% in
FY02 suggesting that earnings are likely to
increase 16% and 22% respectively.
· The industry is standardizing on Harman?s
optical bus technology. The company is
designed into year 2002-2004 models for
virtually all leading European auto
manufacturers and enjoys strong presence in
· Cost reduction in European and US consumer
products and incremental business with Lexus
is driving strong EPS growth in FY01. New
infotainment products to Audi, Porsche,
Mercedes, BMW and Peugeot should produce
20-25% annual EPS growth in FY02-FY04.
· Management guidance was very conservative;
it took far weaker results than we assumed at
Chrysler, Best Buy, Circuit City, PCs and the
Euro to reduce earnings growth to low end of
· We are lowering our estimates to $2.40 from
$2.48 and to $2.90 from $3.10 in FY01 and
FY02, respectively. We rate HAR a strong buy
and maintain our 12 month target price of $55 ,
17x-18x CY02, up over 56% from current
(VRTS-$93 3/4-Cap $41B?Strong Buy)
W.Laidley/D.Eller (415) 836-7716/7785
Recent Weakness Creates Great Entry Point
2000E $0.58, 2001E $0.86
· VRTS shares are down 27% over the last 3
trading sessions, largely attributable to
concerns that a slowdown at SUNW could
have a material impact on VRTS? business in
coming quarters. We believe there are several
reasons to dispute this correlation.
· SUNW revenue contribution is diversified: We
estimate VRTS will derive roughly $80 million
directly from SUNW in 2000 (or 7% of total),
with 1/3 in the form of royalties from embedded
products and 2/3 from SUNW? sales force
reselling VRTS add-on products.
· Advance notice to revenue stream fluctuations:
In the hypothetical scenario where SUNW
royalty revenue declined from its blistering 70%
YoY growth rate, given that VRTS recognizes
SUNW royalties one quarter in arrears VRTS
would have one full quarter to compensate with
· Platform penetration offsets slowdown: Despite
the conceptual connection, we believe VRTS?
penetration and market share gains within the
SUNW marketplace, combined with deeper
penetration of virtually all other HW platforms,
insulates the Company from potentially slower
growth at any one vendor including SUNW.
· Growth from both new & existing boxes: We
believe a material portion of VRTS? growth is
generated from incremental penetration of
existing HW installations through broader
market sales coverage, new products and
enterprise-wide standardization decisions.
· VRTS? market is more than just SUNW
servers: The Company?s target market - data
availability - involves not only the various
server platforms (SUNW, HP, IBM, Intel-based,
etc.) but also storage sub-systems, network
CSFB Tech Weekly Update
Dec 19 TQNT: Triquent SemiConductor
Dec 19-21 Line56Live!
New York, NY
Dec 19 FOMC Policy Announcement
Dec 27 SDLI: SDL Shareholders Meeting to
Approve Pending Merger
Dec 27 JDSU - JDS Uniphase Shareholders
Meeting to Approve Pending Merger
San Jose, CA
SLR - Q1 2001 Solectron Earnings
Conf Call: 4:30pm ET Tel:212-346-6532
Replay: Dec 18, 2000, 8:30pm ET Tel:800-
ESIO - Q2 2001 Electro Scientific Industries
Earnings Conference Call
Conf Call: 4:45pm ET Tel:800-230-1074
Replay: 8:15pm ET Tel:800-475-6701
JBL - Q1 2001 Jabil Circuit Earnings
Conf Call: 4:30pm ET Tel:212-896-6009
Pwd:Jabil Circuit Earnin
Replay: 6:30pm ET Tel:800-633-8284
SFAM - Q2 2000 Speedfam-IPEC Earnings
Conf Call: 5:00pm ET Tel:719-457-2617
Replay: 7:00pm ET Tel:719-457-0820
Code:776051 RSVP Required
APW ? APW LtdF1Q01 EPS
Replay 800.633.8284/Res # 16756401
Palm Q2/00 Results 5:00PM EST
Dial-In: 888-868-9080, int?l 973-628-6885
replay 877-375-1352 International: 402-220-
The Tech Weekly Update is a feature that appears each Friday.
Tech Group Actions This Week
Emulex Corporation (EMLX-$179.92-Cap $6.9B-Buy): Initiated with a Buy
rating by Amit Chopra.
Novatel Wireless (NVTL-$12 3/16-Cap $800M-Buy): Initiated with a Buy rating
by Ray Sharma and Marc Cabi.
TTM Tech. (TTMI-$15.13-Cap $508.4M-Strong Buy): Estimates raised by Mark
Hassenberg. New FY01 EPS estimate is $1.03 (from $0.96).
TriQuint Semiconductor (TQNT-$61.4-Cap $5.5B-Hold): Downgraded to Hold
from Buy rating by Michael Masdea.
ANADIGICS (ANAD-$21-Cap $655M-Hold): Downgraded to Hold from Buy by
Intraware, Inc. (ITRA-$2.47-Cap $65M-Hold): Downgraded to Hold from Buy
rating by Christopher Vroom and Ian Toll.
DoubleClick (DCLK-$11.94-Cap-$1.5B-Buy): Estimates lowered by Jamie
Kiggen and Richard Petersen. FY01 EPS estimate is $0.09 (from $0.25).
Microchip Technology Inc. (MCHP-$26.81-Cap $3.4B-Buy): Estimates
lowered by Tim Mahon. FY01 EPS estimate is $1.28 (was $1.34) and FY02E is
$1.48 (was $1.55).
STMicroelectronics (STM-$48.06-Cap $44.9B-Buy): Downgraded to Buy from
Strong Buy rating by Tim Mahon and Jean Danjou. New FY01 EPS estimate is
$1.99 (was $2.24) and price target is $65 (was $80).
Compaq Computer Corp. (CPQ-$20.77-Cap $35.3B-Hold): Estimates lowered
by Kevin McCarthy. New 2001 EPS estimate is $1.25.
Dallas Semiconductor (DS-$26.00-Cap $1.7B-Buy): Estimates lowered by
Charlie Glavin. 2001 EPS estimate is $1.67 (was $1.98).
Razorfish (RAZF-$3 3/32-Cap $0.3B-Buy): Estimates and price target reduced
by Mark Wolfenberger, Barry Chubrik and David Sturtz. Reduced FY01 rev &
EPS ests to $225M & ($0.40). Revising price target to $5 (2.2x F01 revs).
Eastman Kodak (EK-$41.06-Cap $12.6B-Buy): Estimates lowered by
Gibboney Huske and Kumar Cidambi. 2001 EPS estimate is $4.65 (from $5.10).
Silicon Image (SIMG-$8.63-Cap $484M-Buy): Estimates lowered by Charlie
Glavin. New EPS estimates are cY00: $0.05 (was $0.06) and $0.01 (was
General Semiconductor: (SEM-$8.75-Cap $434M- Buy): Estimates lowered by