Thursday, September 21, 2006

Calls of Note Part 2

- JP Morgan notes they spent the last week in Asia visiting several companies to assess PC,
wireless, and overall semiconductor supply chain health. Most companies in the PC food chain appear to expect growth during 3Q06. However, a majority of the companies they visited expect sub-seasonal sequential growth Q3 and have limited visibility into Q4.

Many companies noted share gains by Intel in the channel, consistent with checks. However, firm's checks also indicate AMD (NYSE:AMD) is gaining share at OEMs, which should offset Intel's share gains in the channel since the OEM end market is larger and exhibits higher pricing and margins than the channel.

Checks indicate AMD's sales and margins are ahead of plan during 3Q06 due to robust demand for its processors (96% of 2Q06 sales). They believe the strong demand is being driven by share gains at key OEMs such as HP and Dell and is resulting in upside to both previous revenue and gross margin estimates.

As a result of the higher sales and margins, the firm is raising their C06 revenue and EPS estimates from $5.1 billion and $0.91 to $5.4 billion and $1.19. Maintains Neutral.

Notablecalls: Not actionable but good to know category.

- Prudential notes that Disney (NYSE:DIS) management indicated yesterday in a meeting with Prudential Entertainment Analyst Katherine Styponias that it expects to make more of their video content on-line to take advantage of the high expected growth rate in online display advertising.

Firm sees this as a positive for streaming media and web content delivery service provider Akamai (NASDAQ:AKAM). They believe a number of Disney media properties including ABC and ESPN are Akamai customers.

Firm continues to see no sign either from Akamai or from industry of any deceleration in demand for web content distribution, with video one of the primary growth drivers. They are currently modeling 46% organic y/y revenue growth for AKAM in 2H06, in line with 2Q06.

On top of the underlying growth in video delivery over the Internet, they believe Akamai is taking an increasing "share of wallet" at most of its major media customers.

Reiterates Overweight rating and $51 price target on AKAM.

Notablecalls: AKAM sure looks like it wants to move higher from here. Prudential may just have given a reason for a run.

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