) to sell from hold.
Analyst Satya Chillara says the company is at risk of compression in product gross margins in the coming quarters. He says license and royalty revenues may begin decreasing from the second quarter of 2004. Chillara notes the increasingly competitive landscape in the flash card/universal serial bus drive arena, particularly from the likes of ScanDisk. He says valuation has run well ahead of fundamentals.
Chillara believes the risks outweigh expectations of a third-quarter top-line upside. He sees 9 cents third-quarter earnings per share, 33 cents for 2003, and 45 cents for 2004. He has an $11 12-month target.