Punk Ziegel downgraded FalconStor Software (FALC) to market perform from buy, citing weakness at two original equipment manufacturing partners.
Analyst Steven Berg believes the weakness had an adverse effect on FalconStor's first quarter results. He says EMC (EMC) had a real struggle to make the low end of revenue guidance (the last quarter was about 20% of FalconStor's revenue.) He says more than a half-dozen notable data-storage executives left Sun Microsystems (SUNW) since it completed its merger with Storage Tech. His sense is that these departures removed some of the direction Sun started to establish in the fourth quarter, when it was again losing market share this quarter. He says Sun is also a greater than 10% customer to FalconStor. He cut his $60 million 2006 revenue estimate to $56.6 million, 17 cents earnings per share (EPS) to 16 cents. He cut his $10.50 stock price target to $9.