Tuesday, June 27, 2006

Calls of Note Part 3

- JP Morgan notes they had hoped that the Dads and Grads season would provide a significant boost to Apple (NASDAQ:AAPL)'s iPod shipments for the June quarter, firm's checks indicate that this was not the case. As a result, they are reducing expectations for the June quarter to 8.01 million units from 8.73 million.

In addition, the company may have to reduce channel sell-in during the September quarter ahead of its expected product refreshes in the fall, and as a result, the firm is reducing September quarter iPod estimates as well. For the September quarter, they are forecasting 8.54 million units, versus 10.7 million previously.

The news on the Mac side of the equation appears far rosier. Firm is raising their overall Mac shipment forecast for the quarter to 1.27 million from 1.24 million. Early indications suggest that the MacBook consumer laptop is a hit, and this could provide some upside to Mac forecasts for the quarter. With the Intel transition nearing completion, they believe Mac share gains will begin to accelerate in the latter part of the calendar year.

For the June quarter, the firm now expects revenues of $4.39 billion down from $4.45 billion. EPS estimate including options remains unchanged at $0.44. Reits Overweight.

Notablecalls: So, iPod revs are declining and Mac sales are not enough to cover the difference? Makes you say hmmm...

- Banc of America is reducing their June Q (and CY06) revenue and EPS estimates on Western Digital (NYSE:WDC) to reflect PC market weakness. June Q rev and EPS are now $1.07B and $0.33 from $1.9B and $0.34. They are also establishing initial CY07 revenue and EPS estimates of ~$5.0B and $1.95 (incl. options).

Firm believes Samsung and Hitachi gained share this quarter, unlike past quarters, limiting WDC's share gains. WDC will end the quarter with 6 weeks of inventory, which is reasonable for this time of year. Believes that higher than 6 weeks would be a problem, for any hard drive player.

Maintains Neutral rating and lowers tgt to $20 from $22.50, or 10x - 11x CY07 EPS of $1.95. Thinks that near-term WDC will be range bound, given the backdrop of the PC market.

Notablecalls: Not actionable but good to know category.

- JP Morgan has an interesting report on Microsoft (NASDAQ:MSFT) where the firm highlights some of the key things that will have to happen for MSFT to drive a recovery in the stock over the next 6-9 months. They think one of the near term catalysts will be the announcement of another cash distribution plan that will likely be accretive to CY07.

In addition to the $50B in cash, cash equivalents and investments on its balance sheet, they estimate MSFT will generate nearly $12B in free cash flow (after dividend payout) in FY07. Firm expects MSFT to announce another repurchase plan near term and believes that the new plan could be in the $20-30B range leaving ample capital for the company's acquisition strategy.

Notablecalls: Not actionable but good to know category. The stock has done nada for 8 yrs. Firing Ballmer would be the 1st real step to recovery.

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