Markets & Finance

Analyst Actions: Dell, Force Protection, SeaChange

Opinions from analysts around Wall Street Friday

From Standard & Poor's Equity ResearchBEAR STEARNS CUTS ESTIMATES ON DELL

Bear Stearns analyst Andrew Neff says Dell's (DELL) third quarter results were mixed, as better revenues were met by a profit miss due to gross margin compression and op-ex escalation. He says while some investors were disappointed with Dell's unwillingness to quantify its share buyback plan, Dell said it will resume its stock buyback in early December.

Neff says, as an early stage turnaround, the key is things don't get better overnight and it's unfair to compare Dell with Hewlett-Packard (HPQ) (with its nearly flawless turnaround).

Neff cuts $1.45 fiscal year 2008 (January) EPS to $1.41, $2.05 fiscal year 2009 to $2.00, $2.40 fiscal year 2010 to $2.35; and his $43 price target to $40. But he maintains outperform recommendation, and would use weakness as a buying opportunity given a compelling risk/reward profile.


Friedman says a potential change in the U.S. Marine's requirement is negative for Force Protection (FRPT). Analyst Patrick McCarthy says reports indicate U.S. Marine Corps contemplating scaling back its MRAP (mine resistant ambush protected) requirements by as much as one-third. He says if USMC cuts are forwarded to, and approved by, Office of the Secretary of Defense, USMC MRAP requirement would fall to 2,400 vehicles, total program requirement would fall to about 16,400 vehicles.

McCarthy says if USMC follows through with this proposal, his initial analysis suggests that FRPT's vehicle production in 2007 and 2008 would fall by 372 vehicles. He notes that the impact to 2008 revenues would be about $206 million, suggesting negative impact to EPS would be approximately $0.21 in 2008.


Needham analyst Greg Mesniaeff says SeaChange International (SEAC) revenues for the third quarter were $49 million, up 16% year-over-year, while pro forma EPS of $0.11 beat Street estimates of $0.03 EPS. He says top-line strength primarily driven by higher VOD systems revenue from U.S.-based MSOs (multiple systems operators). He notes gross margin increased 4.5 points sequentially to 49.5%, due to a more software-rich sales mix.

Mesniaeff continues to view SEAC shares as an inexpensive way to play the high-growth segments of the digital video transition, and thus remains a buyer of SEAC shares. He narrows $0.24 fiscal year 2008 (January) pro-forma loss estimate to $0.03 loss, sees $0.10 fiscal year 2009 EPS. He keeps $12 12-month price target.

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