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Street Talk: Rating techs
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October 19, 2000: 11:28 a.m. ET
Analysts cut Apple, TI; but boost Microsoft, AOL, Sun, chip stocks, Ford
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NEW YORK (CNNfn) - Analysts extended the miseries of Apple Computer and Texas Instruments Thursday morning, while giving a boost to Microsoft, America Online and Sun Microsystems. As usual, earnings and revenue were the engines driving both upgrades and downgrades.
Bear Stearns cut its earnings-per-share estimates on Apple Computer (AAPL: Research, Estimates) after the personal computer maker reported lower-than-expected fiscal fourth-quarter earnings and said it expected to make only a "slight profit" in its first quarter. Wall Street analysts had expected Apple to earn 45 cents a share in the first quarter.
Bear Stearns slashed its first-quarter estimate to 5 cents a share from 42 cents and its 2001 estimate to $1.10 from $1.45.
Credit Suisse First Boston cut its estimate for Apple's 2001 to $1.10 a share from $1.75 and its estimate for 2002 to $1.45 from $2.10.
Paine Webber cut its first-quarter 2001 estimate on Apple to a penny a share from 39 cents a share and its 2001 estimate to $1.16 from $1.50.
SG Cowen cut its 2001 earnings estimate on Apple to $1.15 from $1.90.
Goldman Sachs cut its earnings estimates for chip maker Texas Instruments (TXN: Research, Estimates), a day after it reported third-quarter earnings that met analysts' expectations, but warned of lower revenue.
Goldman cut its fourth-quarter estimate to 33 cents a share from 36 cents and its 2001 estimate to $1.55 from $1.60.
Other firms also weighed in. CSFB cut its 2000 earnings estimate for TI to $1.24 a share from $1.29 and its 2001 estimate to $1.62 a share from $1.70. Paine Webber lowered its 2000 estimate to $1.24 a share from $1.28 and its 2001 estimate to $1.59 from $1.64. SG Cowen lowered its 2000 forecast to $1.24 a share from $1.27 and its 2001 estimate to $1.50 from $1.58. Lehman Brothers slashed its 2000 estimate to $1.24 a share from $1.27 and its 2001 estimate to $1.53 from $1.60. And Bear Stearns cut its 2000 estimate to $1.24 a share from $1.29 and its 2001 estimate to $1.64 from $1.75.
ABN Amro cut its 12-month price target for Texas Instruments shares to $65 from $85. ABN Amro also cut its 2000 earnings estimate to $1.24 a share from $1.28 and its 2001 estimate to $1.60 from $1.70.
Texas Instruments shares were up $7.75 to $44.63 in Thursday morning trading.
A company in a similar boat was Conexant Systems (CNXT: Research, Estimates), a modem chip maker whose fiscal fourth-quarter earnings met analysts' expectations, but who forecast lower revenue for the next quarter due to slipping demand.
SG Cowen downgraded Conexant to "buy" from "strong buy" and cut its 2001 earnings estimate to 57 cents a share from 92 cents. Bear Stearns slashed its 2000 estimate on Conexant to 65 cents a share from $1.10 and its first-quarter 2001 earnings to 11 cents from 22 cents.
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Bear Stearns also cut its rating on Internet software maker Allaire (ALLR: Research, Estimates) to "neutral" from "attractive" and cut its fourth-quarter outlook to a loss of 26 cents a share from a profit of 10 cents a share. Allaire reported a third-quarter loss of 16 cents a share Wednesday, a penny worse than Wall Street estimates.
On the brighter side, Goldman Sachs raised its 2001 earnings estimate for software maker Microsoft (MSFT: Research, Estimates) to $1.91 a share from $1.88 after the company reported better-than-expected fiscal first-quarter earnings Wednesday.
Lehman Brothers slightly raised its fiscal 2001 earnings estimate for Microsoft, to $1.91 a share from $1.88. Paine Webber raised its fiscal first-quarter estimate on Microsoft to 45 cents a share from 41 cents and its 2001 estimate to $1.93 from $1.88.
SG Cowen raised its fiscal 2001 earnings estimate on Microsoft to $1.74 a share from $1.72 and set a 2002 estimate of $2.04 a share, but said "growth remains challenging."
CSFB was also kind to America Online (AOL: Research, Estimates), reiterating its "buy" rating on the company, which is in a deal to purchase CNNfn.com parent Time Warner (TWX: Research, Estimates). AOL reported fiscal first-quarter earnings Wednesday that beat analysts' expectations by a penny a share, and tried to calm fears about slowing advertising revenue. CSFB has an $80 price target on AOL shares.
Lehman Brothers, on the other hand, said AOL's earnings were "nothing to write home about" and left its estimates in place.
Bear Stearns boosted network server company Sun Microsystems (SUNW: Research, Estimates) after it also reported fiscal first-quarter earnings that beat Wall Street forecasts, raising its 2001 earnings estimate to $1.40 a share from $1.35 and its 2002 estimate to $1.85 from $1.60.
Paine Webber raised its second-quarter 2001 estimate on Sun to 33 cents a share from 30 cents and its 2001 estimate to $1.40 from $1.35. SG Cowen raised its 2001 earnings estimate on Sun to $1.40 a share from $1.33 and its 2002 estimate to $1.80 from $1.70.
ABN Amro raised its rating on Sun to "buy" from "outperform" and its 12-month price target to $150 from $140.
Sun shares added $5.94 Thursday to $116.25.
Stacking chips
Goldman Sachs raised its earnings estimates on Broadcom (BRCM: Research, Estimates) after the communications semiconductor maker reported better-than-expected third-quarter earnings on strong revenue growth.
Goldman raised its 2000 estimate to $1.01 a share from 90 cents and its 2001 estimate to $1.45 from $1.25. Meanwhile, Paine Webber raised its 2000 earnings estimate to $1 a share from 90 cents and its 2001 estimate to $1.48 from $1.34. CSFB boosted its 2000 estimate to $1.01 a share from 90 cents and its 2001 estimate to $1.35 from $1.22. And SG Cowen increased its 2000 earnings estimate on Broadcom to $1.02 a share from 92 cents and its 2001 estimate to $1.50 from $1.30.
Paine Webber raised its 2001 earnings estimate on Vitesse Semiconductor (VTSS: Research, Estimates) to $1.16 a share from $1.06 and reiterated its "buy" rating and $200 price target on the stock.
Lehman Brothers raised its 2000 earnings estimate on Vitesse to 67 cents from 65 cents and its 2001 estimate to $1.16 from 98 cents. SG Cowen upped its 2001 earnings estimate on Vitesse to $1.18 a share from $1.08.
SG Cowen also raised earnings estimates on three other semiconductor companies: Chartered Semiconductor (CHRT: Research, Estimates), Cirrus Logic (CRUS: Research, Estimates) and Integrated Device Technology (IDTI: Research, Estimates).
Cowen raised its 2000 earnings estimate on Chartered to $1.75 a share from $1.56 and its 2001 estimate to $2.35 from $2.14. It increased its fiscal 2001 estimate on Cirrus to 91 cents a share from 78 cents and its 2002 estimate to $1.19 from $1.10. And it boosted its fiscal 2001 earnings estimate on Integrated Device Technology to $3.13 a share from $2.88 and its 2002 estimate to $3.75 from $3.14.
Gazing at Celestica
Lehman Brothers raised its rating on electronics manufacturing services company Celestica (CLS: Research, Estimates) to "buy" from "neutral" and set a price target on the stock of $150 after the Toronto company reported earnings that beat Wall Street estimates.
Merrill Lynch raised its 2000 earnings estimate on Celestica to $1.35 a share from $1.29 and its 2001 estimate to $1.92 from $1.82. Bear Stearns increased its 2000 estimate to $1.34 a share from $1.26, its fourth-quarter 2000 estimate to 45 cents from 41 cents, and its 2001 estimate to $1.90 from $1.78.
Favoring Ford
In an auto industry update, Lehman Brothers analyst Nicholas Lobaccaro recommended investors switch to Ford (F: Research, Estimates) from DaimlerChrysler (DCX: Research, Estimates) and General Motors (GM: Research, Estimates).
"We continue to believe that Ford is fundamentally a much stronger company than GM and DaimlerChrysler, which is obvious from a comparison of each company's third-quarter performance," Lobaccaro said in a research report.
"We continue to believe that Ford will enjoy a significant advantage over GM and DaimlerChrysler in terms of mix, incentive levels and the ability to significantly grow luxury sales," Lobaccaro said. "Ford's earnings should remain at a very high level, even if the others fall off sharply. Ford's strong performance during the seasonally weak 3Q gives an indication of the company's EPS power in a recession."
In a separate research note, Lehman Brothers cut its 2000 estimate on Ford to $3.51 a share from $3.79, but left its 2001 estimate in place. The report said Ford would have had a "blowout" third quarter if not for the Firestone tire-recall "debacle."
Paine Webber reiterated its "buy" rating on Ford, but cut its 2001 earnings estimate to $3.90 a share from $4.15.
Ringing Phone.com
SG Cowen reiterated its "strong buy" ratings on Phone.com (PHCM: Research, Estimates) and Software.com (SWCM: Research, Estimates), which are planning to merge. Phone.com reported first-quarter earnings Wednesday that beat analysts' expectations.
Cowen reduced the estimated loss for Phone.com's fiscal fourth-quarter 2001 to 29 cents a share from 45 cents. It raised its 2000 estimate on Software.com to 26 cents a share from 14 cents and its 2001 estimate to 33 cents from 21 cents. "Both companies have considerable momentum going into (their) merger," Cowen said.
Phone.com makes software applications that help deliver Internet services to wireless phones, while Software.com makes Internet infrastructure applications.
Lehman Brothers reduced its estimated fiscal 2001 loss for Phone.com to 25 cents a share from 71 cents.
Snapping Kodak
Goldman Sachs cut its 2000 earnings estimate for Eastman Kodak (EK: Research, Estimates) to $5 a share from $5.25 and its 2001 estimate to $5.50 from $5.80. Kodak, hurt by a sharp slowdown in film sales, posted an 8 percent drop in third-quarter operating profits Wednesday, but exceeded Wall Street's lowered forecasts.
 Paine Webber cut its 2000 estimate on Kodak to $5.10 from $5.30 and its 2001 estimate to $5.20 from $5.95. It also cut its price target on the stock to $43 from $54.
CSFB cut its fourth-quarter earnings estimate for Kodak to $1.06 a share from $1.14.
Broker Van der Hoop Effektenbank raised its recommendation on ABN Amro (ABN: Research, Estimates) to "buy" from "outperform" after the Dutch bank's takeover of U.S. firm Alleghany Asset Management.
Van der Hoop said asset management had been one of ABN Amro's weak points, making a strengthening of this division a necessary step. 
-- compiled by Mark Gongloff from staff and wire reports
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