Markets & Finance

S&P Keeps Its Hold Rating on Intel


Intel (INTC): Reiterates 3 STARS (hold)

Analyst: Amrit Tewary

Sony, IBM Corp., and Toshiba unveiled the Cell microprocessor at an industry forum. The Cell chip is viewed by some as a potential threat to Intel and its existing x86 chip architecture. Although the Cell chip appears to have many advanced features, we think it will be more of a disruptive force in the gaming market than in core PC market, which has been dominated by x86 architecture. The x86 is supported by Microsoft and other key players, and has weathered a number of similar competitive threats over the years.

Sony (SNE): Reiterates 3 STARS (hold)

Analyst: John Yang

The Cell chip, developed by Sony, IBM, and Toshiba, could become a major technology with multiple applications. Sony sees production starting in calendar 2005, but we see minimal fiscal 2006 (ending March) earnings per share impact. The chip seems too advanced and we see no application that would complement it. While Cell could be a key element of Sony's Play Station 3, the key features of the new game console haven't been disclosed. We await further details from Sony on Cell strategy and applications.

Invitrogen (IVGN): Reiterates 5 STARS (strong buy)

Analyst: Mark Basham

Invitrogen shares rose 7% on Feb. 8 as it agreed to acquire privately held Dynal Biotech for $380 million. Dynal is the leader in the use of magnetic bead technologies in cell separation and purification. Invitrogen expects the transaction to close by the end of the first quarter, subject to approvals. It sees $74 million in incremental revenue through the end of 2005, and projects the deal to be accretive to 2005 operating EPS by 7 cents and to 2006's by 24 cents. We will update our outlook following the company's conference call.

Activision (ATVI): Reiterates 4 STARS (buy)

Analyst: Megan Graham-Hackett

The company reported December-quarter EPS of 63 cents, vs. 53 cents one year earlier, 8 cents above our estimate. Revenues of $680 million were notably better than our forecast, driven by strong sales of the Spiderman, Tony Hawk, Shrek, and Call of Duty titles. Activision has about $4.60 per share in cash and investments,

and no debt. We are raising our fiscal 2005 (ending March) and fiscal 2006 EPS estimates to 89 cents and 95 cents, from 81 cents and 91 cents, respectively. We view the shares as attractive, trading below peers on enterprise value-to-sales

basis, and on our view of Activision's strong balance sheet. We are raising our target price to $28 from $24 on relative valuation metrics.

Ask Jeeves (ASKJ): Reiterates 3 STARS (hold)

Analyst: Scott Kessler

Following speculation by several blogs over the past few days, Ask Jeeves announces the completed acquisition of Trustic, Inc., the company that owns Bloglines, a popular free online service for searching, subscribing to, publishing, and sharing RSS feeds, blogs, and rich Internet content. No financial terms were provided. We believe this deal will enable Ask Jeeves to better differentiate itself from larger and better-known competitors, and provide additional shelf-space for its online advertising. However, it is unclear to us how Bloglines will alter Ask Jeeves's business model and prospects.

Lincare Holdings (LNCR): Reiterates 3 STARS (hold)

Analyst: Cameron Lavey

Lincare posted fourth-quarter earnings per share of 68 cents, vs 59 cents, 2 cents ahead of our estimate. Revenue rose 7% on 5% internal growth and 2% from acquisitions, slightly below our estimate of a total of 8%. Lower selling, general, and administrative and operating expenses drove earnings per share gains. Results include the adjustments for Lincare's outstanding contingent convertibles. We remain cautious on the shares due to uncertainty surrounding planned Medicare reimbursement cuts in 2005. We are maintaining our 2005 earnings per share estimate of $2.10, but are raising our 12-month target price by $3 to $41, based on our view of higher cash flows in 2005.


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