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Analyst Picks and Pans

Analyst Picks and Pans: Oracle, Black & Decker, Harmonic

( (ORCL)) Jefferies & Co. keeps buy William Blair & Co. reiterates outperform Oracle "continues to execute very well given the spending environment and relative to competition," Jefferies & Co. analyst Ross MacMillan wrote in a June 24 note to clients. Oracle, based in Redwood City, Calif., reported a 5% drop in sales after the close of trading June 23 and a 7% dip in earnings. But analysts were expecting worse. And the company's forecast for the three months ending in August also beat Wall Street projections. Laura Lederman, an analyst with William Blair & Co., called the results "another proof point of Oracle's share gains in a difficult market," reiterating an "Outperform" rating. Oracle, which recently agreed to a $7.4 billion acquisition of Sun Microsystems Inc. ( (JAVA)), was hit hard by the strengthening dollar, with a large chunk of its sales coming from overseas. And businesses have kept a tight lid on technology spending during the recession. But the company said revenue from support contracts helped sales, since companies still need to maintain their older software. ( (BDK)) Credit Suisse upgrades to neutral from underperform Black & Decker Corp. has seen the worst of earnings, an analyst Daniel Oppenheim of Credit Suisse said June 24 as he upgraded the tool and appliance maker. "A tough selling environment will likely persist into '10," Oppenheim wrote in a note to investors, adding that he thinks earnings -- and margins -- have seen their lows. He said he expects sales and margins to keep declining due to continuing deteriorating in new construction, remodeling and consumer spending this year and 2010. He has a price target of $27 on the shares, which closed Tuesday at $27.51. Black & Decker's inventories are lean, indicating an "eventual shift" to restocking from destocking, Oppenheim said. In addition, the company is focused on cutting selling and general and administrative expenses, which dropped 23% in the first quarter, "and we expect these benefits to mute the weak sales," he said. Oppenheim estimates Black & Decker will earn $0.38 cents per share in the second quarter, driven by a 28% decline in sales. Harmonic Inc. ( ()) Jefferies & Co. downgrades to hold from buy Jefferies & Co. downgraded Harmonic Inc. on June 24, citing pressure on prices, a likely decline in revenue from satellite TV providers and an uncertain outlook for the company's digital video networking unit. In a June 24 note, Jefferies analyst George Notter also moved his price target to $6 from $8. Harmonic, which provides broadcast and on-demand video delivery systems, has seen intensifying pressure on prices for its equipment, Notter said. On top of that, he said revenue from satellite TV providers is likely to decline as recent checks suggest operators may defer upgrading equipment. Notter also said that Scopus, a digital video networking company Harmonic agreed to buy last year in a deal worth $51 million, may prove an "incremental source of disappointment for investors." He said the unit is exposed to the weak economy and currencies in Eastern Europe and other emerging markets as well as the slump in advertising.

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