Wednesday, August 16, 2006

Calls of Note Part 2

- UBS notes they continue to favor shares of System Memory market player SanDisk (NASDAQ:SNDK) owing to the exposure it offers to the rapidly growing role of NAND flash expansion cards into wireless handsets, and the prospects for improving NAND market fundamentals and investor sentiment when Apple refreshes its holiday MP3 line up.

SanDisk and its partner Toshiba continue to demonstrate NAND market leadership in terms of MLC and new product innovation, and we believe the acquisition of M-Systems and its x4, U3, embedded handset NAND and other technologies is likely to extend this leadership over the next several years.

Firm believes SanDisk guidance and Street expectations are based on historic seasonal patterns that fail to fully incorporate the growing role of wireless handset demand for NAND, especially into the holiday build cycle. They also note the good elasticity of demand due to aggressive cost cutting on the part of SanDisk/Toshiba.

UBS' $70 target is based on 28x current options burdened C2007E EPS of $2.50. Firm assigns a 2 predictability level owing to uncertainties in consumerdemand and competition from new rivals. Reits Buy.

Notablecalls: Nothing new here. But given the positive sentiment we saw yesterday I would not be surprised to see some additional strenght.

- Morgan Stanley is lowering their one-year price target on (NYSE:CRM) to $27 from $31, as an increasingly competitive On-Demand CRM market leads them to reduce firm's long-term operating margin assumptions. While the stock is down from its highs and may have priced in some of our concerns about the sustainability of net new subscriber growth due to last year's spike in large customer wins, increasing competition from larger vendors such as Microsoft, Oracle and SAP keeps them Underweight on the name.

A detailed scenario analysis, incorporating our preliminary estimates around the AppExchange business opportunity, suggests is now trading above firm's current base case intrinsic value for the company. However, they show a wide variance between bear case ($14), base case ($24), and bull case ($39) scenarios due to the nascent nature of both and the software-as-a-service (SaaS) market itself.

Aanalysis suggests that's core CRM business targeting small and mid-sized businesses and an On-Demand application platform targeting the long thin tail of vertical specific application functionality can support a core value of $24 today, with a one-year price target of $27. However, the stock may still see further downward pressure as investors' expectations about the long-term nature of's business continue to evolve and the competitive pressures from Microsoft's Dynamics offering and a resurgent Siebel On-Demand, now under Oracle's control, reach a crescendo in 2007.

Notablecalls: This may put a cap on CRM's recent run. Would not want to be long here.

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