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From Standard & Poor's Equity ResearchBEAR STEARNS DOWNGRADES SUN MICROSYSTEMS TO PEER PERFORM FROM OUTPERFORM
Bear Stearns analyst Andrew Neff says he has doubts about the Sun Microsystems (JAVA) turnaround story. He says, while has seen IBM (IBM), EMC (EMC)and Hewlett-Packard (HPQ) successfully negotiate through challenging conditions, JAVA fell short on third quarter revenues due to weakness in the U.S. and high-end systems/storage coupled with weak gross margin (from lower revenues and poor mix).
Also, Neff says JAVA now expects flat revenue growth in the fourth quarter, guided to GAAP operating margin of "at least" 7% in fiscal year 2009, down from 9% despite restructuring efforts.
He cuts his $1.23 fiscal year 2008, $1.35 fiscal year 2009 and $1.65 fiscal year 2010 (June) EPS estimates to $0.80, $1.00 and $1.35, respectively. He now sees fair value of $15.55-$16.65, down from previous $24.45-$27.15.
NEEDHAM CUTS MAGMA DESIGN AUTOMATION TO HOLD FROM BUY
Needham analyst Richard Valera says Magma Design Auto's (LAVA) fourth quarter revenue of $55 million missed his $57 million estimate, but $0.17 pro forma EPS was in line with his estimate. He notes $390 million backlog is 7% below $420 million at the end of fiscal year 2007 (March); he expected backlog at $470-$490 million to support the company's fiscal year 2009 revenue guidance of 12%-15%.
He says management suggested several large deals slipped out due to variety of factors, but also noted one deal had been cut in half due to tight spending controls at customer. He notes the company lowered 12%-15% fiscal year 2009 revenue growth guidance to 5%-7.5%, offered pro forma EPS guidance of $0.50-$0.55, well below his $0.74 estimate and actually down year-over-year.
He cuts his $246 million fiscal year 2009 revenue estimate to $227 million and $0.74 EPS to $0.53.