Coinstar: Piper Bullish On Redbox; Launches With Overweight Rating

Piper Jaffray analyst Michael Olson today launched coverage of Coinstar (CSTR) with an Overweight rating and $38 price target. The parent of the Redbox video kiosk chain closed yesterday at $31.96.

Olson sees several trends working in the company’s favor:

  • DVD rental kiosk market is gaining share from traditional retailers like Blockbuster.
  • Internet delivery likely still 3-5 years from going mainstream.
  • Consumers shifting to DVD rentals from purchases due to low fees from Redbox - $1-a-day.

“While we have no doubt that Internet delivery will be the primary way consumers access content long-term, we believe many are over optimistic regarding mainstream adoption of Internet deliver near-term,” he write. Meanwhile, he adds, Redbox should see “significant growth.”

CSTR today is up $1.04, or 3.3%, to $33.

Brocade: Buyer Would Likely Pay $13/Shr Or More, Bernstein Says

Following up on yesterday’s Wall Street Journal report which said that Brocade (BRCD) has put itself up for sale, Bernstein Research analyst Jeff Evenson today did some calculations on how much the company might bring in a potential sale. His conclusion: a lot more than the current stock price.

Evenson says the most comparable deals in 2009 - EMC/Data Domain, Dell/Perot, Broadcom/Emulex and Oracle/Sun - provided the seller an average premium of 66%. Applying that that premium to the company’s closing price last Friday before the WSJ story yields a price of $12.70. On an enterprise value/sales basis looking at the same peer transactions, he comes up with a price closer to $14.

The Journal piece named Hewlett-Packard (HPQ) as the most likely buyer for Brocade, with Oracle (ORCL) another likely potential suitor. Evenson writes that another potential buyer is Juniper (JNPR), noting that a combination with Brocade would quickly turn the company into the #2 enterprise networking company.

EVenson notes that Dell (DELL) and IBM (IBM) also could be potential suitors, although he adds that Bernstein hardware analyst Toni Sacconaghi doesn’t think either would be interested.

BRCD today is off 11 cents at $8.98; yesterday the stock rose $1.44.

Ciena Keeps Crumbling; Potential Nortel Deal Has Investors Worried

Ciena (CIEN) shares are not reacting well to the news that the company is in talks to acquire Nortel’s Metro Ethernet Networks business.

In a release yesterday, Ciena acknowledged that it is holding talks about buying the Nortel unit. The announcement came after the company apparently inadvertently posted - and then took down - a news release that said the company had a deal to acqurie the Nortel unit for $400 million in cash and 10 million Ciena shares. (Again, I would note that the release has been taken down, so it is hard to know the current status of discussions.)

Here’s a quick look at some of today’s analyst commentary on the promise - and risks - of such a combination:

  • Paul Silverstein, Credit Suisse: He has a Neutral rating and $11 price target, which is below yesterday’s close at $14.17. He says the proposed deal “poses near-term risks to CIEN and its shareholders,” including the impact on net cash, integration risk and potential EPS dilution. He also notes that there are other potential bidders, including Ericsson (ERIC), Nokia Siemens (NOK) and Infinera (INFN).
  • Hasan Imam, Thomas Weisel Partners: Market Weight rating. “The asserts are expensive for CIEN, and would stress its balance sheet and introduce new integration/restructuring challenges.”
  • Nikos Theodosopoulos, UBS: He says Ciena would go from a product story to a scale story; the deal would add 1,300 people to the 2,100 at the company now, and add $1.4 billion in revenue to a base of about $750 million.  It would also likely move the balance sheet from a net cash position to one of net debt. He maintains a Neutral rating and $14 target.
  • Tal Liani, Bank of America/Merrill Lunch: He maintains an Underperform rating and $10 price target. “We are mostly positive on the implications of such a deal long term, but also see risks it offers,” including lower growth rates, a more leveraged balance sheet and integration risks.

CIEN is down 81 cents, or 5.7%, to $13.36; the stock is down more than 18% over the last four sessions.

Apple: Susquehanna Boosts Target On Stronger Mac, iPhone Sales

Susquehanna Financial analyst Jeff Fidacaro today lifted his price target on Apple (AAPL) to $210, from $180, while repeating his Positive rating on the stock.

Fidacaro also lifted his revenue estimate for FY 2010 to $43.973 billion from $43.544 billion; his EPS estimate is now $7.62, up from $7.53.

The analyst writes that the adjustments reflects “better-than-expected sales trends for Macs, slightly higher iPhone unit sales, and acceleration in App Store daily application downloads.”

Fidacaro boosted his FY 2010 iPhone unit forecast to 29.5 million from 28.9 million; for 2011 he goes to 38 million, from 36.9 million. He sees Mac units of 11 million in FY 2010, and 13 million in 2011, slightly above his previous forecasts.

AAPL today is up $3.62, or 1.9%, to $189.64.

Verizon Wireless Bullish On Android

Verizon Wireless (VZ, VOD) this morning announced a “strategic partnership” with Google (GOOG) to support phones based on Google’s Android operating system software.

In an announcement, the companies said that the companies will “devote substantial resources to accelerate delivery of leading-edge innovation that will put unique applications in the hands of consumers quickly.” The two companies will also co-develop several Android-based devices, with phones to come from “leading handset manufacturers.”

Obvious unanswered questions:

  • Does imply that Apple (AAPL) isn’t going to take a multi-carrier approach in the U.S., and will stick to an exclusive strategy with AT&T? Certainly, the announcement suggests that Verizon has come up with a strategy for a more aggressive iPhone-free future.
  • Does this suggest that the expected debut of Palm (PALM) devices on Verizon might be crowded out by other phones?
  • And does this mean that the expected launch of a Android-based phone from Motorola (MOT) on Verizon in fact is coming soon?

Feel free to pontificate below.

Epicor Says Q3 Profits To Top Guidance; Amends Credit Deal; Shares Rally

Epicor Software (EPIC) shares are sharply higher this morning after the company said it now expects non-GAAP Q3 profits to to exceed the previous guidance of 9-10 cents a share. Revenue is expected to meet the previous guidance of $96 million to $100 million.

The enterprise software company also said it signed an amended credit facility that gives the company more operating flexibility. The revised agreement eliminates total leverage and fixed-charge financial convenants, reduces the size of the facility to $100 million, shortens the maturing by five months to September 30, 2012 and increases the applicable interest rate margin by 2% to 2.25%.

EPIC today is up 64 cents, or 10%, to $7.07.

Harris & Harris Prices 4.25M Shares At $4.75; 14.4% Discount To Monday’s Close

Harris & Harris (TINY) this morning said it has priced an offering of 4,250,000 shares at $4.75, a 14.4% discount to yesterday’s close at $5.55. The nanotech-focused venture capital firm said it expects proceeds of about $18.6 million. The company has provided sole underwriters Needham & Co. permission to sell another 637,500 shares to cover over-allotments.

Harris & Harris said it will use proceeds to make new and follow-on investments, and for operating expenses.

TINY today is down 62 cents, or 11.2%, to $4.93.

Deal Du Jour: Emerson Acquiring Avocent For $1.2 Billion

And the deal machine rolls on.

Emerson Electric (EMR) this morning announced a deal to acquire Avocent (AVCT), a Huntsville, Alabama based producer of IT management hardware and software, for $1.2 billion in cash, or $25 a share. (Among other things, they make LANDesk, a software updating system which periodically pops up and forces me to reboot my laptop. Maybe Emerson can find a way to make the software less irritating.)  Avocent had 2008 sales of $657 million.

The deal is expected to close around January 1.

AVCT is trading just under the deal price, up $4.32, or 21.1%, to $24.84. EMR is up $1.06, or 2.7%, to $39.74.

Intel: Buy Ahead Of Earnings, Morgan Stanley Advises

Morgan Stanley analyst Mark Lipacis this morning repeated his Buy rating on Intel (INTC), asserting that the company is likely to report better-than-forecast results for the third quarter.

“Based on our proprietary channel checks in the server channel, positive trends in the Asia supply chain and back-to-school sales, we think Intel will report revenues above the midpoint of its revised guidance and consensus estimates” when it reports earnings next week, he writes in a research note.

For the quarter, he sees revenue of $9.2 billion, at the high end of the guidance range of $8.8 billion to $9.2 billion, with EPS of 28 cents, up from a previous estimate of 27 cents. For 2010, he now sees EPS of $1.38, up from $1.31, and well ahead of the Street consensus of $1.19. Lipacis writes that he continues to see upside from an enterprise spending cycle for PCs in 2010.

Lipacis maintains his Overweight rating and $24 price target.

INTC today is up 35 cents, or 1.8%, to $!9.45.

EMC: Barclays Boosts Target; Ups 2010 Estimate

Barclays Capital analyst Ben Reitzes this morning repeated his buy rating on EMC (EMC), which increasing his price target on the shares to $21, from $!8. The stock yesterday closed at $16.76.

Reitzes trimmed his 2009 EPS estimate by a penny to 82 cents; but he lifted his 2010 forecast to $1.05, from 99 cents.

“Our checks indicate that EMC is benefiting from a new product cycle and stronger storage demand in general,” he writes in a research note.  In particular, he says the company is seeing a pick up in demand for its new high-end V-Max storage array. He says there is stronger demand in particular in the financial services segment.

EMC today is up 44 cents, or 2.6%, to $17.44.

America Movil: Citi, Merrill Upgrade

America Movil (AMX) shares this morning received a pair of upgrades from large brokerage firms.

  • Citigroup analyst James Rivett upped his rating on the Latin American wireless operator to Buy from Hold, while keeping his price target at $50. The stock closed yesterday at $42.63. Rivett writes that he decided to upgrade the stock after visiting carriers in Mexico and Brazil, both countries in which AMX operates. In Mexico, he writes, spectrum constraints for Telefonica means AMX should continue to gain market share. In Brazil, he adds, fears that the company would chase market share at the expense of margins remain unfounded.
  • Bank of America/Merrill Lunch analyst Mauricio Fernandez lifted his rating on the stock to Buy from Neutral, keeping his target at $53. Fernandez has turned cautious on the stock in August; but he notes that the stock has since pulled back 10%. Current valuation is compelling, he writes. He notes that one reason for pressure on the shares lately was a letter from the FCC seeking more information from AT&T (T) about its 8% stake in AMX; the request came amid the Commission’s review of AT&T’s deal to buy Centennial, which operates in Puerto Rico in competition with AMX. “If faced with the decision to either sell its AMX stake of its Puerto Rican operations, we think AT&T would for for the latter,” he says. Fernandez also says it is possible that Televisa could be interested in a new block of spectrum to be auctioned off soon in Mexico; but he says it is unlikely a new entrant will emerge given wireless penetration in Mexico is already close to 80%.

AMX today is up $1.35, or 3.1%, to $45.14.

Corning: UBS Upgrades On Better Outlook For LCDs

Corning (GLW) shares are getting a lift this morning from UBS analyst Nikos Theodosopoulos, who raised his rating on the glass maker’s shares to Buy from Neutral. He inches up his price target to $19, from $18.50. GLW yesterday closed at $14.56.

In a research note, Theodosopoulos notes that his UBS colleagues in Asia have raised their outlook for LCD demand by 10% for 2009 and by 12% for 2010, on expectations of higher holiday season sell-through in China, particularly for LCD TVs. He says UBS also now sees better supply/demand balance both this year and next year: for 2009, the firm now sees overcapacity of 2.9%, rather than 12%; for 2010, they now see excess capacity of 6%, down from 7.4%.

“At less than 10x consensus EPS estimates for 2010″ and a free cash flow yield of more than 7%, “we find the current valuation attractive and foresee limited downside,” he writes.

GLW today is up 83 cents, or 5.6%, to $15.64.

Yesterday, S&P raised its rating on the stock.

Arris Slides On Jefferies Downgrade

Arris Group (ARRS) shares are trading lower this morning after Jefferies analyst George Notter cut his rating on the cable TV equipment maker’s stock to Underperform from Hold. His new price target on the stock is $9.50, down from $12. The stock yesterday closed at $12.67.

Notter writes that the company will benefit from the DOCSIS 3.0 upgrade cycle, but contends Street expectations don’t reflect the margin and revenue pressure Arris will face as Comcast wraps up its initial upgrades.

He trims his 2009 EPS estimate by a penny to 70 cents; for 2010, he now expects profits of 50 cents, down from 57 cents.

ARRS today is down 74 cents, or 5.8%, to $11.93.

Trident Heading Higher On Needham Upgrade After NXP Deal, Increased Guidance

Trident Microsystems (TRID) shares are heading sharply higher this morning after Needham analyst Rajvindra Gill upgraded the stock to Buy from Hold, with a price target of $5, or nearly twice yesterday’s close at $2.68.

Yesterday, the company made two noteworthy announcements. For starters, Trident said it now expects to report revenue for its fiscal first quarter ended September 30 of $31 million, well above previous guidance of $22 million to $25 million.  The company now sees a non-GAAP operating loss of about $10 million, rather than the previously forecast $12 million to $14 million. Trident sees quarter-end cash of about $161 million, slightly lower than previously forecast, due to “timing of working capital.”

Meanwhile, in a deal that will dramatically transform the company, Trident also said it will acquire NXP Semiconductors‘ TV systems and set-top box business, in exchange for Trident common shares equal to 60% of the post-deal shares outstanding, including 6.7 million shares that NXP will buy at $4.50 a share. After the deal, Trident expects to have calendar 2009 revenue of about $500 million.

Shares issued to NXP would be subject to a two-year lock up agreement. Trident CEO Sylvia Summers keeper her post; Christos Lagomichos, who was EVP of NXP’s Home business unit, becomes Trident’s President.

Trident said it expects to generate revenue of $140 million to $160 million the June 2010 quarter, the first full quarter post-closing, with break-even non-GAAP profits as early as the end of calendar 2010.

Needham’s Gill writes that Trident had been struggling in the digital TV market after losing share to competitors, but that this deal helps the company consolidate share in the competitive sector. Gill estimates the value of the transaction  at about $200 million, which he asserts is “a good deal for TRID.” He notes that the company is trading under 0.5x EV/sales post acquisition. He notes that the company will have about $180-$185 million in cash.

Gill now sees revenue for the June 2010 year of $246.5 million, up from $100 million, with a loss of 39 cents, versus a previous estimated loss of 70 cents. For FY 2011, his revenue estimate hikes to $670 million from $135 million, with a profit of 5 cents, versus an old estimate of a loss of 60 cents.

TRID today is up 13 cents, or 4.9%, to $2.81.

Analyst Roundup: Plantronics, Quest, Corning Upgraded to Buy

Herewith a roundup of some interesting tidbits missed earlier today:

Tavis McCourt, Morgan Keegan: Raised his rating on Plantronics (PLT) to “Outperform” from “Market Perform” after the company said Friday it would sell its Altec Lansing business that makes speakers, which Plantronics bought for $166 million in July of 2005, for $18 million to private equity firm Prophet Equity LP. McCourt expects the deal to remove a burden on the company’s profit growth, and consequently raised his profit estimate for calendar 2010 from $1.57 to $1.68. He feels the shares have “little downside” trading at less than 11 times projected cash earnings per share. Plantronics shares rose 8.7% to $26.93.

Scott Brown, Auriga Securities: Raised his rating to “Buy” from “Hold” on shares of Quest Software (QSFT), which makes enterprise system management software, based on a belief the company is focusing on improving profit margin and may undertake restructuring efforts that could help streamline its product portfolio. Brown thinks a divestiture could happen over the next three to six months. Q2 operating profit of 22.8% was an all-time high for the company, and he foresees half a percentage point of margin expansion in 2010. Quest’s P/E of 11.5 times next year’s EPS of $1.39 is “too extreme” relative to peers, writes Brown. He raised his price target to $20 from $17. Quest shares rose $1.46, or 9%, to $17.64.

Todd Rosenbluth, Standard & Poor’s: Raised his rating on Corning (GLW) to “Buy” from “Hold” based on a belief global demand for larger LCD glass panels is rising, which could boost sales and margins for Corning. Corning is scheduled to report earnings late this month. Rosenbluth raised his estimates for this year’s profit to $1.28 from $1.25 and for next year to $1.55 from $1.45. His price target goes to $19 from $18. Corning shares today rose 25 cents, or 1.7%, to $14.81.

Rich Kugele, Greg Mesniaeff, Needham & Co.: Speculate about the possibility of an acquisition of Brocade Communications Systems (BRCD), as mentioned in today’s Wall Street Journal, and conclude they would not be surprised to find more consolidation in enterprise gear/services along the lines of the recent Dell (DELL)/Perot Systems (PER) acquistion.

RIMM: Bernstein Sees Margins Shrinking; Launches Coverage With Underperform Rating

Research In Motion (RIMM) is likely to see shrinking margins as consumer customers become a greater percentage of the company’s user base, Bernstein Research analyst Pierre Ferragu asserts in a research report this afternoon. Ferragu launched coverage of the company with an Underperform rating and a $60 price target. RIMM on Monday was unchanged at $65.42.

Ferragu writes in his research note that the company is likely to see “good  but decelerating growth” in the next three years. He notes that the BlackBerry remains “virtually unchallenged” in the corporate smartphone segment, and should maintains its dominant position there. But he also contends that the company is likely to see shrinking margins as it relies more on the consumer sector for growth.

“The potential for consumer e-mail is gigantic,” he writes, but mass-market players now offer comparable products, and growth in high ASP segments is likely to slow sharply. “Lower price phones are likely to be required to maintain momentum,” he writes. And here’s the punch line: “Growth in this segment is therefore likely to put significant pressure on RIMM’s ASPs and profitability.”

Ferragu concedes that the stock appears attractively valued against consensus expectations - but he says those expectations are too high. He sees ASPs falling 10% in FY 2010, and another 7% in FY 2011. He expects RIMM’s gross margin to decline  by 3 points to 40% in FY 2011, with operating margins down three points to 19%.

Ergo Ferragu advises investors to “stay away,” or “take at least partial profits,” and to wait for expectations to be revised downward and for the stock price to “adjust accordingly.”

Verizon Re-Arranges The Wireline Deck Chairs

Verizon (VZ) this afternoon announced a management restructuring that combines two wireline-focused business groups, Verizon Telecom and Verizon Business, into a new organization called Verizon Wireline, “with the objective of accelerating operational performance.”

The company did not say if the reorg would involve any headcount reductions.

Daniel Mead, who was president of Verizon Telecom, becomes COO of Verizon Wireless, replacing Jack Plating, who is retiring. John Stratton, who was chief marketing officer of Verizon, is now CMO for Verizon Wireless; the corporate CMO position is eliminated, with marketing functions integrated into the business groups. Fran Shamo, who was president of Verizon Business, becomes president of the new Verizon Wireline.

In late trading, VZ is up 3 cents at $29.99.

Cirrus Forecasts Q2 Above Estimates

Analog chip maker Cirrus Logic (CRUS) this evening announced it would report higher-than-expected sales for its fiscal Q2 ended September 26 of $55.7 million, above its forecast range of $48 million to $52 million. Analysts on average have been looking for $49.8 million. The company attributed the outperformance to higher sales of chips for audio transmission.

Cirrus expects gross profit at the high end of the forecast range of 50% to 52%, R&D and selling & general expenses of $24.1 million, and $1.8 million of share-based compensation and amortization expense.

Cirrus will report final results on Oct. 20 at 10:30 AM Eastern.

Cirrus shares were up about 11% at $5.70 in after-hours trading after rising fractionally during the regular session.

Harris & Harris Plans Stock Offering; Stock Slides

Harris & Harris (TINY), a publicly traded venture firm focused on nanotechnology, this afternoon announced plans for a follow-on stock offering. The company did not say how many shares it intends to sell; the deal is being underwritten solely by Needham & Co. Perhaps anticipating a discounted offering price, the stock in after hours trading is down 15 cents, or 2.7%, to $5.40. The stock fell 26 cents in the regular session.