Smith Barney downgraded Starbucks (SBUX

) to in-line from outperform.

Analyst Mark Kalinowski says the downgrade mainly reflects higher than expected tax rates that will likely restrain upside potential to earnings per share for rest of fiscal 2003 (Sep). He says the results would've beaten his estimates, as well as the consensus 14-cent estimate, had the tax rate not been 40% (he forecast 37%). Kalinowski notes the higher tax rate results from a shift in the mix from where Starbucks generates profits. He says North American operations are performing better than he expected, but overseas is not doing as well as thought.

Kalinowski trimmed the 68 cents fiscal 2003 earnings per share estimate to 67 cents, and cut the 83 cents fiscal 2004 estimate to 81 cents. He thinks it's time for investors to take their profits.