Results for the tech stocks in last week's preview were a mixed bag, some beats, some misses, some in line. By and large, expectations for tech companies reporting results this week remain high, though. Here's what analysts surveyed by Thomson Financial are anticipating in the way of earnings, as compared to the same period of the previous year.
MOST NOTEWORTHY: Amazon.com, Altria Group and Skilled Healthcare were today's noteworthy initiations:
Canaccord Adams expects Amazon.com (NASDAQ: AMZN) growth to be driven by its expanding international reach, mix shift to third-party revenue, product innovation, and category expansion. The firm initiated shares with a Buy rating and $78 target.
UBS is positive on Altria's (NYSE: MO) growth, low likelihood of downward EPS revisions, and best-in-class cash flow distribution; shares were started with a Buy rating.
Skilled Healthcare (NYSE: SKH) was initiated with an Outperform rating at Morgan Keegan, as they believe nursing home reimbursement risk is already reflected in its valuation.
OTHER INITIATIONS:
KeyBank assumed Callaway Golf (NYSE: ELY) with a Buy rating and $19 target.
Credit Suisse initiated Intuit (NASDAQ: INTU) with an Outperform rating and $35 target.
Broadpoint initiated Novell (NASDAQ: NOVL) with a Buy rating.
Here are highlights of some other earnings reports from Thursday:
Gap Inc. (NYSE: GPS) reported a 21% increase in its fourth-quarter profit year over year. The $265 million, or 35 cents per share, matched analysts' expectations. Revenue totaled $4.68 billion, down 5% from the previous year.
Kohls Corp. (NYSE: KSS) fourth-quarter profit fell about 15% year over year to $411.7 million, or $1.31 per share, just beating analysts' estimates. Sales rose less than 1% $5.49 billion, but same-store sales fell.
Novell Inc. (NASDAQ: NOVL) swung to a profit in its fiscal first quarter: $16.8 million, or 5 cents per share, matching expectations. Revenue rose to $230.9 million from $218.4 million a year ago.
For more than a week, Novell, Inc. (Nasdaq: NOVL) has delayed its earnings. But, we got the results yesterday -- and they were fairly ho-hum. Fiscal Q4 revenues increased 5% to $244.9 million but there was a net loss of $17.9 million or $0.05 per share. Keep in mind that there were one-time expenses for the sale of a consulting division.
No doubt, Novell is still in the restructuring mode. Some of the initiatives include: outsourcing technical talent to low-wage countries; stronger partner relationships; and shared services with its back office.
However, with $1.3 billion in the bank -- which represents more than half of Novell's market cap -- there will likely be pressure from investors, such as for buybacks.
KO announced Muhtar Kent as its new CEO, succeeding resining chairman and CEO Neville Isdell. Isdell will remain chairman until April 2009. KO overall option implied volatility of 21 is near its 26-week average of 20 according to Track Data, suggesting non-directional risk.
NOVL postponed its Q4 and full year 2007 earnings release because of inquiries from the SEC about NOVL's accounting practices. NOVL, a provider of network software, closed at $6.94. NOVL overall implied volatility of 46 is above its 26-week average of 35 according to Track Data, suggesting larger risk.
Daily Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
The key to the effectiveness of network software is the experience of the provider. There is an outfit in Waltham, Massachusetts that shapes up pretty good along that line. It has been in business for nearly a quarter of a century and serves more than 50,000 customers.
Novell Inc. (NASDAQ: NOVL) is engaged in the development, implementation and support of mixed source and open source business software. The firm's flagship NetWare operating system integrates corporate networks, connecting servers with PCs, storage systems and printers. Novell also provides network management software, directory services products, a version of the Linux operating system and IT consulting services. Strategic partners include Dell (NASDAQ: DELL), Intel (NASDAQ: INTC) and Oracle (NASDAQ: ORCL).
The company pleased investors last week, when it reported fiscal Q3 EPS of five cents and revenues of $243 million. Analysts had been looking for two cents and $234.8 million. Management also guided FY07 revenues to $925-$955 ($942.42M consensus). First Albany subsequently spoke well of the stock, citing an improved balance sheet, a low valuation and potential future restructuring/buyback catalysts. The NOVL price popped on the news and has since settled into a bullish "flag" consolidation pattern. Equities frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.
Brokers recommend the issue with two "strong buys," three "buys," seven "holds" and one "sell." Analysts expect a 43% growth rate through the next year. The NOVL Price to Sales ratio (2.68), Price to Book ratio (2.23), Price to Free Cash Flow ratio (6.70) and EPS Growth rate (66.67%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 73% of the outstanding shares. The stock is one of those used to calculate the S&P 500 Index. Over the past 52 weeks, it has traded between $5.70 and $8.26. A stop-loss of $6.35 looks good here.
The theory goes that Linux, the open-source operating system, will replace Windows as the preferred software to run servers. Over time, the cost advantage of software created by a community of developers would overwhelm the pricey Microsoft (NASDAQ: MSFT) product.
So much for theory. Windows is actually taking share from Linux in the server market. According to TheStreet.com "Microsoft picked up 2 percentage points, bringing its market share to 67.1% of servers shipped during the second quarter." Windows server revenue hit $5 billion in the second quarter compared to $1.8 billion for Linux.
The one operating system that did not do well in the last quarter was Unix, which is marketed by Sun (NASDAQ: JAVA) among others.
In some ways the figures are not a surprise, despite the cost advantage of Linux. The large enterprise marketers of the software, Novell (NASDAQ: NOVL) and Redhat (NASDAQ: RHT) have never become large companies.
Linux still operates under the threat of patent litigation. Microsoft has claimed that the open-source software violates several hundred of its patents.
Big enterprises shy away from products with potential IP problems, and that may be Microsoft's biggest weapon.
When it comes to creating effective network software, experience is the key. There is an outfit in Waltham, Massachusetts that shapes up pretty good that way. It has been in business for nearly a quarter of a century and serves more than 50,000 customers.
Novell Inc. (NASDAQ: NOVL) is engaged in the development, implementation and support of mixed source and open source business software. The firm's flagship NetWare operating system integrates corporate networks, connecting servers with PCs, storage systems and printers. Novell also provides network management software, collaborative tools, directory services products, a version of the Linux operating system and IT consulting services. Strategic partners include Dell (NASDAQ: DELL), Hewlett-Packard (NYSE: HPQ), IBM (NYSE: IBM), Intel (NASDAQ: INTC), Oracle (NASDAQ: ORCL) and Microsoft (NASDAQ: MSFT).
The company pleased investors last week, when it reported Q2 EPS of three cents and revenues of $239.0 million. Analysts had been looking for a penny and $234.8 million. The CEO cited the impact of cost control measures and strength in the firm's Linux and Identity businesses for success. Management also guided FY07 revenues to $925-$955 ($953.50M consensus). NOVL shares popped into a bullish "pennant" consolidation pattern on the news. Prices frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.
When Microsoft Corp. (NASDAQ: MSFT) shook hands with Linux proponent Novell Inc. (NASDAQ: NOVL), it was questioned what the Windows software maker was up to. Was the open-source software world shaking hands with the devil? In some circles, this conspiracy theory has been twisted around quite a few times. Is a Microsoft and Novell partnership really going to be focused on extricating old but stable Unix platforms out of data centers in order to get their wares in the door and in use?
Maybe. The Microsoft and Novell alliance, though, has just scored its first home run to ensure that possible scenario does indeed happen. Dell Inc. (NASDAQ: DELL), the world's second-largest computer manufacturer (behind Hewlett-Packard), has just joined the Microsoft-Novell business collaboration to have open-source Linux software working with Windows.
Will Dell's alignment with the Microsoft-Novell alliance really allow the Windows and Linux environments to further entrench themselves into massive corporate data centers? Probably, but Dell doesn't have a stranglehold on this market or anything. Competitors like Hewlett-Packard, Sun and IBM are still heavy forces in that environment. Unseating even a piece of all that may not come easily, especially against protective IBM. So, for now, this Dell alignment is good PR, but the proof is in the performance pudding. Check back in late 2008.
Senior Citigroup Inc (NYSE: C) executives are afraid the company could become a target of activist hedge funds seeking to break the company up, reported the Financial Times.
According to the Financial Times, a number of companies involved in options backdating scandals, including McAfee Incorporated (NYSE: MFE) and Novell Inc (NASDAQ: NOVL), could be vulnerable to takeover by activist investors.
OTHER PAPERS:
The New York Times "Dealbook" reported that Porsche has bid $48.9B for Volkswagen AG (OTC: VLKAY), and the bid will run for four weeks starting today.
The News Journal reported that AstraZeneca (NYSE: AZN) has received a subpoena from the Delaware Attorney General, which seeks documents about the company's contracts with Delaware hospitals.
MOST NOTEWORTHY: First Data Corp (FDC), Molson Coors Brewing Co (TAP), MetLife, Inc (MET), GSI Commerce, Inc (GSIC) and Foundation Coal Holdings, Inc (FCL) were some of today's noteworthy downgrades:
Citigroup cut First Data Corp (NYSE: FDC) to Hold from Buy and AG Edwards cut the Colorado-based Computer Services company to Hold from Buy, following the acquisition by KKR; AG Edwards also removed First Data from its Focus Portfolio.
Bernstein downgraded Molson Coors Brewing Co (NYSE: TAP) to Market Perform from Outperform based on valuation.
Goldman Sachs removed MetLife Inc (NYSE: MET) from its Conviction Buy List.
Bear Stearns cut GSI Commerce (NASDAQ: GSIC) to Underperform from Outperform based on valuation.
Jefferies downgraded Novell, Inc (NASDAQ: NOVL) to Hold from Buy on valuation after yesterday's "April Fool's-inspired" rally as the firm believes upside from the initial Microsoft-(MSFT) driven SLES deals and restructuring are priced in.
Stifel downgraded Pearson PLC (NYSE: PSO) to Hold from Buy on valuation.
Benchmark downgraded ConocoPhillips (NYSE: COP) to Sell from Hold on valuation.
Buckingham downgraded Diebold Inc (NYSE: DBD) to Neutral from Accumulate on valuation.
CIBC downgraded Ipsco Inc (NYSE: IPS) to Sector Performer from Outperform based on valuation.
Results for the tech stocks in last week's preview were a mixed bag, some beats, some misses, some in line. By and large, expectations for tech companies reporting results this week remain high, though. Here's what analysts surveyed by Thomson Financial are anticipating in the way of earnings, as compared to the same period of the previous year. 
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had been looking for two cents and $234.8 million. Management also guided FY07 revenues to $925-$955 ($942.42M consensus). First Albany subsequently spoke well of the stock, citing an improved balance sheet, a low valuation and potential future restructuring/buyback catalysts. The NOVL price popped on the news and has since settled into a bullish "flag" consolidation pattern. Equities frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside..gif){kind=logo}
The company pleased investors last week, when it reported Q2 EPS of three cents and revenues of $239.0 million. Analysts had been looking for a penny and $234.8 million. The CEO cited the impact of cost control measures and strength in the firm's Linux and Identity businesses for success. Management also guided FY07 revenues to $925-$955 ($953.50M consensus). NOVL shares popped into a bullish "pennant" consolidation pattern on the news. Prices frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside..gif){kind=logo}
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