Markets & Finance

S&P Picks and Pans: Intel, Time Warner, Satyam, Family Dollar, Borland


Analysts' opinions on stocks in the news Wednesday

From Standard & Poor's Equity ResearchS&P REITERATES BUY RECOMMENDATION ON SHARES OF INTEL CORP (INTC; 14.62):

The company sees fourth quarter sales of $8.2 billion, below previously revised guidance of about $9 billion plus or minus $300 million, and below our $9 billion forecast. INTC attributes the lower guidance to greater weakness in end demand and to inventory reductions across the supply chain. While we see near-term results remaining weak, we think INTC will likely outperform peers, based on its strong competitive and financial position as well as its advanced technological products. We reduce our 2008 EPS estimate to $1.09 from $1.15 and 2009's to $0.91 from $1.00. -C. Montevirgen, A. Zino-CFA

S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF TIME WARNER (TWX; 10.02):

TWX sees $25 billion fourth quarter non-cash charge to cable, publishing, and AOL units; trims expected 2008 adjusted EBITDA growth from 5% to 1% based on court ruling, lease restructuring and credit losses; and sees 2008 net loss, cut from prior $1.04-$1.07 EPS guidance. While Time Warner Cable (TWC; 21.86) took the bulk of the charge, we think somewhat unexpected news further underscores the urgency of near-term shifts in strategic priorities after likely imminent TWC separation, as TWX today also indicated both AOL and publishing face even more challenging ad markets. We await fourth quarter release on Feb. 4. -T. Amobi-CPA,CFA

S&P REITERATES HOLD OPINION ON SHARES OF SATYAM COMPUTER SERVICES (SAY; 9.35):

The shares are indicated to open down sharply this morning after SAY's Chairman resigns and informs the board of directors that the company has inflated its cash balance by over $1 billion, reported accrued interest that is non-existent, understated liabilities, and overstated debtors. The balance sheet is distorted because SAY has been overstating profits for the "last several years." The recently failed acquisition bids for Maytas Properties and Maytas Infra were last-ditch efforts to prop up SAY and infuse cash into the balance sheet. We are placing our target price under review. -D. Cathers

S&P KEEPS STRONG BUY OPINION ON SHARES OF FAMILY DOLLAR STORES (FDO; 26.98):

FDO posts November-quarter EPS of $0.42, vs. $0.37, in line with our estimate. We believe the company successfully offset gross margin pressure from sales growth in consumables by leveraging its buying power to improve initial markups, and by effectively managing its inventory to reduce seasonal markdowns and shrinkage. We see the company benefiting from a flight to value among consumers and expect demand for its merchandise, which is composed of everyday necessities, to remain stable over the balance of fiscal year 2009 (August). We will update our outlook after this morning's call. -J. Asaeda

S&P LOWERS RECOMMENDATION ON SHARES OF BORLAND SOFTWARE TO SELL FROM HOLD (BORL; .82):

BORL now expects fourth quarter revenue of $38.5-$40 million, reduced from its prior guidance of about $46 million. CEO Nielsen has resigned and CFO Erik Prusch has been appointed acting CEO. The company plans to cut 15% of its workforce, saving $12-$14 million in annual operating expenses. We think BORL will fall behind its competitors in developing new products if its cost savings plan is implemented. We are widening our 2008 loss per share estimate by $0.06 to $1.91 and 2009's by $0.07 to $0.29. We reduce our target price by $0.50 to $0.50, the lowest level we can use. -J. Yin


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