|
|
Get Four
|  | MARCH 14, 2005
 S&P STOCK PICKS & PANS S&P: IBM Still a Strong Buy Analyst Megan Graham-Hackett thinks Big Blue is paying a "reasonable" price to buy Ascential. Plus: Opinions on Disney, AIG, and more IBM Corp. (IBM ): Reiterates 5 STARS (strong buy) Analyst: Megan Graham-Hackett Consistent with our view that major hardware vendors would accelerate their pace of acquisitions in the software and services area, IBM announces plans to buy Ascential Software for about $1.1 billion in cash, or $18.50 per share. IBM has been adding to its capabilities in business intelligence/data integration software, and we view this proposed acquisition as key to that strategy. We consider the price reasonable at 4 times sales. With IBM differentiation seen accelerating vs. peers, and with shares below our discounted-cash-flow-derived $115 12-month target price, we view IBM as attractive. Walt Disney (DIS ): Reiterates 4 STARS (buy) Analyst: Tuna Amobi, CPA, CFA Disney taps COO Iger to succeed CEO Eisner, whose term ends September 2006. We are not surprised, as we think ABC's rebound vaulted Iger to frontrunner. Eisner again disavowed his intent to stay on board after his term or succeed Chairman George Mitchell, whose retirement is also imminent. However, the news will likely not assuage concerns of governance dissidents, who may view Iger as Eisner's hand-picked successor. Also, with a lengthy 18-month transition period, it is not clear how power-sharing between Eisner and Iger will evolve. Still, we think Iger's background should serve him well. American International Group (AIG ): Reiterates 3 STARS (hold) Analyst: Catherine Seifert Published and unconfirmed reports indicate AIG's Chairman and CEO Maurice Greenberg is set to retire, perhaps as early as this week. We believe this is probably a prudent move, given the number of regulatory investigations underway at AIG. We also note that the company's corporate governance ranks at the upper end of its peer group. Despite this, our outlook is still tempered by what we believe is a lack of clarity on a number of regulatory fronts. Our $72 12-month target price assumes no multiple expansion until there is a greater degree of visibility. eBay (EBAY ): Reiterates 3 STARS (hold) Analyst: Scott Kessler According to the Wall Street Journal, CEO Meg Whitman took herself out of the running for the CEO post at Disney on Friday, Mar. 11, as filling the position was taking longer than she expected. Of interest to us is that Whitman apparently was interested in the Disney CEO position and interviewed for it last week. Although we do not believe Whitman is actively pursuing departure from EBAY at this point, we think new questions and uncertainty about her long-term future with the company will add to the negative sentiment we see swirling around the auction outfit. Marriott International (MAR ): Maintains 3 STARS (hold) Analyst: Thomas Graves, CFA We have a generally favorable view of Marriott's agreement to acquire a 50% joint venture ownership of 46 U.K. hotels, with the company managing the properties. We are raising our 2005 earnings per share estimate to $2.70 from $2.67, which includes negative impacts of 11 cents related to incentives for a new bedding program and 5 cents from option expensing. Before an expected special charge, we look for $3.45 earnings per share in 2006. Both 2005 and 2006 estimates include a 44-cent benefit from what we view as lower earnings per share quality synthetic fuel investments. We are keeping our 12-month target price at $67. Ascential Software (ASCL ): Reiterates 3 STARS (hold) Analyst: Zaineb Bokhari IBM's offer to acquire Ascential for $1.1 billion and $18.50 per share, is consistent with our view that data integration vendors will be targeted for acquisition by larger platform vendors. However, we see the purchase price of $1.1 billion, or about 3.5 times our 2005 sales estimate, as low, particularly since Ascential had nearly $481 million, or $8 per share, in cash and equivalents at end of fourth-quarter. We are raising our 12-month target price from $17 to $19, approximating the offer price; this reflects our view that the transaction, subject to conditions and approvals, will close as expected in second-quarter.  All of the views expressed in this research report accurately reflect the research analyst's personal views regarding any and all of the subject securities or issuers. No part of analyst compensation was, is or will be, directly or indirectly related to the specific recommendations or views expressed in this research report. Standard & Poor's Regulatory Disclosure Any advice, analysis, or recommendations contained in articles labeled "Insight from Standard & Poor's" reflect the views of Standard & Poor's, which operates separately from and independently of BusinessWeek Online. It is possible that BWOL may from time to time publish information that is not consistent with advice, analysis, or recommendations that are published by Standard & Poor's. Standard & Poor's and BusinessWeek Online are each units of The McGraw-Hill Companies, Inc. Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | |
 Copyright 2005, Bloomberg L.P.Terms of Use | Privacy Notice |
Printer-Friendly Version
