Wednesday, September 06, 2006

Calls of Note Part 1

- Merrill Lynch comments on Agere (NYSE:AGR) noting that according to TSR, Jul-06 HDD unit production increased 4% M/M, which was better than the historic average for flat. 1.8" and mobile (2.5") drive production was strong while enterprise and desktop drive production was about flat sequentially. Small drive (1.0"/0.85") production fell 14% Q/Q in July.

July production data suggests that AGR's Sep-06Q is off to a weak start. If production trends at Agere's customers don't improve significantly in August and September, the firm thinks Sep-06Q estimates could be at risk.

Overall unit production at AGR's (35% HDD exposure) customers declined by 8% in July (first month of Sep-06Q) compared to April (first month of Jun-06Q). Even after adjusting the data for share shifts at MXO in Q2, the firm estimates that AGR's units declined by at least 3% in the month of July on a Q/Q basis. This is well below their current forecast of 10% growth for Agere's storage business for the Sep-06Q. While AGR appears to be benefiting from strength in mobile drives at STX, desktop drive unit declines at MXO continue to be a drag on the company's storage business

Notablecalls: Not going to call this one outright actionable but one to keep on radar. Just in case it breaks $15 level and starts rolling over.

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