By Ken Nagy, CFA, Zacks Investment Research.

June quarter revenue for Actel Corporation (NASDAQ: ACTL) fell short of consensus expectations, as the company was short of Flash product. However, the EPS was in-line. Although Flash product growth was lower than expected, the product line is expected to remain strong for the next few years. Actel continues to enjoy a high margin in select markets, although the quicker ramp of new products is likely to exert some negative pressure.

The exposure to the consumer market is also increasing, so working capital requirements are likely to increase. The stock looks attractive at these price levels, but we are reiterating our Hold rating in view of the broader market uncertainties.

Actel's expertise, the limited competition, and its embedded customer base have enabled the firm to emerge as the leading supplier of HiRel FPGAs to the military, avionics and space industries. Actel's Flash products are beginning to take off. The company has introduced seven product families to date, with varying success. Flash products generated 24% of revenue in Q2 of 2008. The management also expects significantly lower cost of production within the 1Q09-2Q09 timeframe, as the company proceeds on the learning curve and also ships higher volumes.

According to Fox News, scientists at International Business Machines Corp. (NYSE: IBM) have found "a new type of digital storage which would enable a device such as an MP3 player to store about half a million songs and cost far less to produce." The development was first published in last week's Science magazine and if implemented would allow for devices that could last more than the "standard" service we see now. The technology, called "racetrack memory" is currently only "exploratory", but IBM hopes to have it in devices within ten years time.

As nice as it sounds, it's hard to see manufacturers or production companies seeking to use technology that would allow for devices that "run on a single battery charge for 'weeks at a time,' and last for decades." Apple Inc. (NASDAQ: AAPL)'s most spacious iPod has a 160 gigabyte hard drive and can store 40,000 songs. If the new technology was used it would mean more than a 10-fold increase in songs but that is still less than the current iPod's more than "32 times the amount of storage the first iPod had when it debuted in late 2001."

The new memory is reportedly also a major improvement over flash, "the most advanced type of memory for small devices", since it has no moving parts, can write data very fast, and will not "wear out" after countless uses. Stuart Parkin, the lead researcher for IBM, also hinted that "the promise of racetrack memory could unleash creativity leading to devices and applications that nobody has imagined yet." In ten more years maybe we can look back and think about the next step, but until then the prospect of many more small numerous portable devices is exciting and distressing.

In a move to create a worldwide PC operation, Taiwan-based PC maker Acer has agreed to buy Gateway (NYSE: GTW) for $710 million, or $1.90 a share. Gateway closed at $1.21 on Friday.

Gateway will also exercise it right of first refusal to buy Europe PC company Packard Bell. Chinese PC company Lenovo has been trying to acquire the firm to improve its reach in Europe.

Douglas A. McIntyre is a partner at 24/7 Wall St.

MAJOR PAPERS:

• The Wall Street Journal reported that the list of advertisers defecting from Don Imus's morning TV show on General Electric Company's (NYSE: GE) and Microsoft Corporation's (NASDAQ: MSFT) MSNBC is growing, resulting in NBC Universal pulling the show off the air immediately.

OTHER PAPERS:

• Sources involved with the process reported that Viacom Inc's (NYSE: VIA) music publishing catalog Famous Music is attracting a lot of interest from major music labels to former music executives backed by private-equity, reported the New York Post.
• France's Thales and American aerospace giant Boeing Company (NYSE: BA) are reportedly looking to make a joint bid for a new $31.7B contract to supply the British Army with 3,000 new medium-weight armored vehicles, reported The Business.
• The Independent reported that scientists have discovered a technique for "pain-free, highly effective chemotherapy," a huge breakthrough in cancer treatment.

WEBSITES:

• DigiTimes.com reported, citing industry sources, that Powerchip Semiconductor Corporation has lowered its DRAM spot prices almost 15% due to fierce price competition, but the sources noted that the low prices have not been able to stimulate demand in the DRAM market.