Microsemi Shutting Scottsdale Plant

Microsemi (MSCC) today said it will shut its manufacturing plant in Scottsdale, Arizona, by April 2011. The chip company said it move is part of an effort to reduce costs. The shutdown should boost operating income by $20 million to $25 million a year, the company said.

MSCC said it will take one-time charges of $24 million to $26 million for severance and related costs.

The company did not say how many people would be affected by the closure.

Let the Droid Wars Begin

It’s here! Motorola (MOT) today unveiled the “Droid,” a Google (GOOG) Android-based phone that’s a follow-on to its “Cliq,” and that will be available at Verizon Communications’s (VZ) Verizon Wireless on Nov. 6, as widely rumored.

The device, word of whose arrival leaked out last week, is believed to be a more formidable offering than the Cliq, which goes on sale next week at Deutsche Telekom’s (DT) T-Mobile in the U.S.

The device will cost $199 after a $100 in-store rebate, with a 2-year Verizon contract.

Confirming other wide rumors, Droid will run the next version of the Android OS, version 2.0, which is expected to bring several new functions, such as better predictive text input and the ability to access multiple Google accounts on the device.

Full specs on the device are here.

Previously: MOT: RBC Upgrades in Joke-Filled Rant (Groan), October 28, 2009.

Roth Cuts INTC, MRVL, NVDA

Roth Capital Partners analyst Arnab Chanda this morning lowered his rating on several chip stocks to “Hold” from “Buy,” citing the risk of a modest inventory build given high projeced margins and growth at Intel (INTC), Marvell (MRVL), Nvidia (NVDA).

“Overall, we’re getting the sense that lead times in the semi industry have gone up a lot. There may be orders that are ‘phantom,’ or double-orders,” Chanda told me in a phone conversation this morning.

“Second, the PC end markets are probably flat year over year, but look at Intel’s [projected Q4 revenue] growth of 23%, Marvell’s 50%, Nvidia’s 80% — that just seems like there’s some “exuberance” embedded in that,” says Chanda. He points out that Intel’s is guiding the Street to expect operating margins in the low 30’s, which is a little too close to the all-time high operating margin for Intel of 35%. “That seems like too much,” he says of Intel’s guidance. As for Marvell, “There was only one year they had a huge product cycle in hard drives and crossed 25% operating margin, and they’re almost there” with their current guidance. So, in general, margins, both gross and operating, have moved close to historical peaks, in Chanda’s view.

“There could be some inventory-related issues” in Q4 of this year and Q1 of next year, he observes, and “It seems a good time to take some money off the table.”

Valuations are not high, he concedes, but it’s hard to look at P/Es because they assume a high margin. If revenue goes down as a result of double-ordering, “that will hit the margins pretty hard,” argues Chanda. “In a strange way, when P/E is really low, that’s not necessarily a good sign,” for chip stocks.

Q4 and Q1 are potential disappointments, says Chanda, but the risk is probably for a mild inventory build, not a huge one, given that that demand is, in fact, going up.

The other stocks Chanda discusses in his note are (ATHR), Broadcom (BRCM), Cavium (CAVM), Monolithic Power (MPWR), Netlogic (NETL), Power Integration (POWI), Qualcomm (QCOM), Silicon Labs (SLAB), and Volterra (VLTR). However, he did not downgrade their shares.

Roth Cuts Intel, Several Chips

Roth Capital Partners analyst Arnab Chanda this morning lowered his rating on several chip stocks to “Hold” from “Buy,” citing the risk of a modest inventory build given high projeced margins and growth at Intel (INTC), Marvell (MRVL), Nvidia (NVDA) and others.

“Overall, we’re getting the sense that lead times in the semi industry have gone up a lot. There may be orders that are ‘phantom,’ or double-orders,” Chanda told me in a phone conversation this morning.

“Second, the PC end markets are probably flat year over year, but look at Intel’s [projected Q4 revenue] growth of 23%, Marvell’s 50%, Nvidia’s 80% — that just seems like there’s some “exuberance” embedded in that,” says Chanda. He points out that Intel’s is guiding the Street to expect operating margins in the low 30’s, which is a little too close to the all-time high operating margin for Intel of 35%. “That seems like too much,” he says of Intel’s guidance. As for Marvell, “There was only one year they had a huge product cycle in hard drives and crossed 25% operating margin, and they’re almost there” with their current guidance. So, in general, margins, both gross and operating, have moved close to historical peaks, in Chanda’s view.

“There could be some inventory-related issues” in Q4 of this year and Q1 of next year, he observes, and “It seems a good time to take some money off the table.”

Valuations are not high, he concedes, but it’s hard to look at P/Es because they assume a high margin. If revenue goes down as a result of double-ordering, “that will hit the margins pretty hard,” argues Chanda. “In a strange way, when P/E is really low, that’s not necessarily a good sign,” for chip stocks.

Q4 and Q1 are potential disappointments, says Chanda, but the risk is probably for a mild inventory build, not a huge one, given that that demand is, in fact, going up.

The other stocks cut by Chanda include are (ATHR), Broadcom (BRCM), Cavium (CAVM), Monolithic Power (MPWR), Netlogic (NETL), Power Integration (POWI), Qualcomm (QCOM), Silicon Labs (SLAB), and Volterra (VLTR).

FORM: FBR Raises to “Outperform”

FBR Capital Markets analyst Mehdi Hosseini this morning raised his rating on shares of FormFactor (FORM), which makes tools to inspect semiconductor wafers, from “Market Perform” to “Outperform,” and raised his price target to $25 from $19, in advance of Form’s Q3 earnings announcement after the bell today.

Hosseini’s thesis is built around growth in DRAM, with the move from DDR2 to DDR3 styles of DRAM chips leading to finer chipper features requiring new tools, which could be an $800 million market for the company. In addition, DRAM for mobile devices could add $40 million per year in revenue to Form’s income statement. What’s more, the “Advanced Probe Card” market, a reference to the company’s new products, is poised to grow six times the rate of the “Legacy” probe card market. Oh my!

Hosseini’s $25 price target represents a 10 times multiple of enterprise value to Ebitda.

Form shares today are up 37 cents, or 2%, at $18.44.

MOT: RBC Upgrades in Joke-Filled Rant (Groan)

In a note to clients this morning laden with forced references to the “Star Wars” franchise, RBC Capital Markets analyst Mark Sue upgraded shares of Motorola (MOT) from “Market Perform” to “Outperform” with an $11 price target.

Sue thinks Motorola could regain some of the past glory of a 12% operating profit margin for its mobile devices division, rather than the negative 21% low point it has recently flirted with, as it rebuilds its phone reputation using Google’s (GOOG) “Android” software.

He lays it all out in movie references that aren’t as edifying as they might be.

Alluding to the forthcoming Motorola “Droid” smartphone, Sue writes “The Wookie Says Upgrade.” His boilerplate caution is expressed as, “While Darth Vader and execution risk remain,” a reference, one assumes, to Nokia (NOK). Motorola, he writes, is preparing “numerous other little droids next year,” and the company “seems to have gotten back in the good graces of the North American carrier federation.” Consumer fickleness, he writes, will mean “short product cycles and Jabba the Hut like competition,” but “Sanjay Skywalker,” a reference to Moto’s CEO of Mobile Devices, Sanjay Jha, has multiple financial levers to pull and “earnings growth may not be in a galaxy far, far away.”

Motorola shares today are up 22 cents, or 2.8%, at $8.12.

TomTom Slides As ASPs Fall On GPS Gear; Drags Down Garmin

Competition is continuing to heat up the in the personal navigation device market, creating  new pressure on shares of both TomTom (TOM2.AS) and Garmin (GRMN).

TomTom this morning posted Q3 revenues that fell 15% year over year; as Reuters notes, the company also said that average selling prices for GPS devices in the quarter were 99 Euros, about 10 Euros below Street expectations. Further aggravating the situation the company said that economic weakness makes it tough project consumer spending for the coming holiday sales period.

Amsterdam-listed TomTom shares are down 15%; in early U.S. trade, shares of rival Garmin are down $1.85, or 4.9%, to $35.94.

CommVault FY Q2 Revs, EPS Top Estimates

CommVault (CVLT) this morning posted better-than-expected results for the fiscal second quarter ended September.

The data storage software company posted revenue for the quarter of $66.7 million and profits of 17 cents a share; the Street had been expecting $62.7 million and 16 cents.

The company did not provide forward guidance in the release.

Will Barry Diller Unload Ask.com?

Looking for a new employer?

Anyone want to buy a search engine?

On a conference call with analysts yesterday, IAC/Interactive (IACI) CEO Barry Diller indicated that the company might be willing to sell search engine Ask.com, which is a distant fourth in the search business behing Google (GOOG), Yahoo (YHOO) and Microsoft (MSFT).

As the Wall Street Journal notes, Diller said on the call that the company is open to a “consolidating transaction” in Internet search, but that his company is not likely to be the consolidator.

Shares of IACI have long suffered from the Diller Discount, a worry that the legendary wheeler-dealer would use the company’s substantial cash position to make a major acquisition. But Diller downplayed that possibility; the market no doubt would rather see the company selling businesses than buying them.

IACI yesterday fell 11 cents to $19.24.

Could The Internet Catch Swine Flu?

What if the Internet got the flu?

In a report earlier this week, the Government Accounting Office warned that if the H1N1 flu keeps more Americans away from work and school, the Internet could grind to a halt as all those people log on to the Web from home, the Washington Post reports today. The report in particular focused on the potential for a spike in Internet traffic to affect the nation’s securities markets.

“Concerns exist that a more severe pandemic outbreak than 2009’s could cause large numbers of people staying home to increase their Internet use and overwhelm Internet providers’ network capacities,” GAO wrote in a summary of the report. “Such network congestion could prevent staff from broker-dealers and other securities market participants from teleworking during a pandemic.”

The Post writes that the Department of Homeland Security is in charge of the communications network during times of national emergency, but that it does not have a plan for dealing with an Internet network overload. GAO said Homeland Security hasn’t coordinated with the FCC to create guidelines for how telecom, cable and satellite providers and minimize congestion.

“Private Internet providers have limited ability to prioritize traffic or take other actions that could assist critical tele-workers. Some actions, such as reducing customers’ transmission speeds or blocking popular Web sites, could negatively impact e-commerce and require government authorization,” the GAO report said.

ValueClick: Q4 Outlook Misses; 3 Analysts Downgrade

ValueClick (VCLK) after the close yesterday posted solid results for the third quarter - but the stock is set for a fall this morning after the online ad company offered weaker than expected guidance for the fourth quarter, triggering a flurry of negative analyst commentary.

For the quarter, the company posted revenue of $130.2 million and EPS adjusted for a tax item of 15 cents a share, ahead of the Street at $129.2 million and 14 cents.

However, the company said it expects Q4 revenue of $128 million to $138 million and GAAP EPS of 15-16 cents a share, below the Street at $142 million and 17 cents.

That guidance triggered downgrades in the stock today by analysts at Needham, ThinkEquity and Merriman Curhan Ford, who cited concerns about weakness in the company’s comparison pricing segment.

Qwest: Q3 Revs Light; EPS Beats By A Penny; Ups ‘09 Cash Flow View; Stock Gains

Qwest (Q) this morning posted Q3 results that were slightly below Street expectations at the top line, but slight ahead at the bottom line.

The teclo posted revenue for the quarter of $3.07 billion, down 1% from a year ago, and a hair below the Street at $3.07 billion. Profits of 8 cents a share beat the Street by a penny.

The company said it now sees full year adjusted EBITDA at the upper end of its previous guidance range of $4.25 billion to $4.4 billion; Qwest sees capital investments for the year of $1.6 billion, compared with a previous forecvast of $1.7 billion or lower. Full year adjusted free cash flow is now expected to be $1.6 billion to $1.7  billion, above previous guidance of $1.5 billion to $1.6 billion.

Headcount fell almost 10% from a year ago; mass market access lines dropped 12.2%.

In pre-market trading, Q is up 15 cents, at $3.60.

Chips: Goldman Downgrades SanDisk; Turns Bullish On Texas Instruments

Goldman Sachs analyst chip analyst James Covello late yesterday cut his rating on flash memory card seller SanDisk (SNDK) to Neutral from Buy, citing the stock’s “full valuation,” while also lifting Texas Instruments (TXN) to Buy from Neutral. With SNDK is now near his $24 price target, Covello writes that there is now greater opportunity in TXN, “driven by margin expansion in 2010, secular growth driven by analog share gains and attractive valuation at 13x normalized EPS.”

Covello writes in a research note that he still thinks NAND fundamentals wil continue to improve, with capacity tightness driving stable ASPs and margins. But he also says that the the real value in SNDK’s business is the royalty stream, since the product business does not generate positive earnings over the course of cycle. He thinks the current stock price is about in line with the fair value of the royalty stream, leaving little incremental upside.

As for TXN, Covello asserts that the market under-estimates the company’s margin potential for next year and 2011 - and also under-estimates the potential for market share gains over the next 2-3 years. He thinks the company can get close to its target gross margin of 55% in the 2010 second half, driven by higher sales, with a push above 55% possible in 2011.

Covello lifted his price target on TXN to $29, from $27.

SAP Cuts Full Year Guidance; Stock Swoons In Europe

SAP (SAP) shares are poised to slide this morning after the company cut its full-year guidance for software and related service revenue for 2009. The company now sees a decline of 6%-8% for the year, down from a previous forecast of down 4%-6%.

The German software giant also posted Q3 revenue of $2.5 billion Euros, down 9% on a GAAP basis and 10% on a non-GAAP basis, with EPS on a non-GAAP basis flat at 41 Euro cents per share. Software revenues were down 31% year over year on a U.S. GAAP basis, while software and software-related services revenue were down 3%.

In a statement, CFO Werner Brandt said that while the company is seeing signs of stabilization, “the market remains difficult.”

Added Brandt: “Third quarter software and software-related service revenues came in lower than we expected mainly because of a particularly challenging environment in the emerging markets and Japan.”

In German trading, SAP is down 6.9%.

Former AMD CEO Ruiz Leaked Spin-Off Info To Galleon Case Figure, WSJ Says (Updated)

The Raj Rajaratnam/Galleon Group insider trading case is showing new signs of being a more serious problems for insiders in Silicon Valley.

In the latest twist, the Wall Street Journal reports that former Advanced Micro Devices (AMD) CEO Hector Ruiz is the AMD exec referred to in a criminal case filed  by the Manhattan D.A.’s office which alleges that an unnamed executive of the chip maker shared confidential information with defendant Danielle Chiesi, a former employee of the hedge fund New Castle Partners. The story sources the story to “a person familiar with the matter.”

Ruiz is not a defendant in the case, in which Rajaratnam, Chiesi and four others face criminal and civil securities charges. The piece says the unnamed exec - that is, Ruiz - leaked confidential information about a 2008 reorganization of the company in which AMD spun off its manufacturing operations to a joint venture funded by investors in Abu Dhabi. Ruiz is chairman of that company, Globalfoundries.

Update: Here’s the AMD response to the WSJ story: “We are investigating the situation, but we don’t have any more detail to discuss publicly. No current or former AMD employee has been charged with a crime and we’re not aware of any allegation of criminal misconduct. It would be inappropriate to comment further on an ongoing Department of Justice investigation.”

Molex FYQ1 Beats, Q2 Outlook Beats

$3.6 billion cable vendor Molex (MOLX) this evening reported fiscal Q1 sales and profit ahead of expectations, and forecast sales and profit for fiscal Q2 ahead of expectations.

Revenue for Q1 fell 20%, year over year, to $674 million, yielding profit per share of 18 cents. The results were ahead of the average $661 million and 15-cent estimates. It was the first quarterly profit after two quarters of losses.

For the fiscal second quarter, the forecast is comfortably ahead of estimates, at $680 million to $720 million with profit per share of 18 cents to 22 cents, excluding restructuring charges. On that basis, analysts were looking for $690 million and 19 cents per share.

Despite rising raw materials costs, gross profit improved from 24% in the prior quarter to 28.4%, the company said.

In the company’s press release, Molex CEO Martin Slark said that the company is seeing “month over month improvements in revenue and orders in virtually all of our key markets,” and added that “Looking forward, we are assessing the sustainability of the recovery as well as the impact of rising raw material costs and the weaker dollar.”

Molex shares were unchanged at $21.20 in after-hours trading after declining fractionally during the regular session.

SuccessFactors Q3 Beats, Forecasts Q4 In Line, Year Ahead of Estimates

Human resources automation software maker SuccessFactors (SFSF), which makes programs to optimize hiring, this evening reported Q3 revenue and EPS slightly ahead of estimates and offered a Q4 outlook more or less in line with expectations.

Revenue in the quarter rose 30%, year over year, to $38.7 million, yielding profit per share of 1 penny, excluding some costs. That was ahead of the $38.5 million and “breakeven” estimate of analysts.

For Q4, the company sees revenue of $39.3 million to $39.7 million, which at the midpoint, is slightly below the average estimate of $39.7 million. The company expects to break even, versus consensus estimate of 1 penny.

For the fiscal year, the company forecast revenue from a prior range of $147 million to $148 million, to a range of $150.1 million to 150.6 million, and forecast a milder net loss than previously expected, at 4 cents per share versus 6 to 7 cents originally. That’s ahead of the average $149.7 million and 5-cent net loss estimate.

SuccessFactors shares are up 2 cents, a fraction of 1%, at $16.40. The stock is up 185% this year.