) to strong buy.
Analyst Jack Romaine says restructuring is expected to cut the fiscal 2004 (March) spending by $30 million. He expects a cash burn of $5 million to $10 million in the fourth quarter, and positive cash flow from operations through fiscal 2004. He says the $5.50 net cash per share and the 70% to 75% incremental gross margins creates a favorable risk/reward with the stock trading at $7.55 at the close of trading on Thursday.
Romaine thinks the company's weak business model poses a risk, as illustrated by its low pretax return on assets. He also is concerned with the company's dependence on a cyclical recovery. He widened his 44-cent fiscal 2003 loss estimate to a 46-cent loss, and narrowed the 39-cent fiscal 2004 loss estimate to a 12-cent loss. He also raised the 19 cents fiscal 2005 earnings per share estimate to 36 cents earnings per share.