Friday, September 29, 2006

Calls of Note Part 5

-Baird notes thay believe Illumina's (NASDAQ:ILMN) high trading volume sell-off yesterday was related to uncertainty surrounding news of a lawsuit initiated by deCODE against former employees and their new employer, Children's Hospital of Philadelphia (CHOP).

These two institutions are the largest customers of ILMN. Firm believes that ILMN has excellent working relationships with both organizations. In fact, both installed systems in June/July and have been ramping chip usage. They confirmed with a CHOP representative that its Center for Applied Genomics plans to run business as usual despite this lawsuit. CHOP has stated that it will "vigorously" defend its employees.

While these lawsuits can cause confusion and become drawn-out affairs, they believe the lawsuit is centered around employer/employee issues and will not directly involve either ILMN or its management team.

Firm continues to believe that ILMN's genotyping and gene expression businesses remain robust and that the company remains on track for a good Q3-06 and 2006.

They believe that AFFX's 500K price reductions did lead to ILMN lowering its pricing structure, but think that ILMN's chips still command a premium price to AFFX's chips. Firm notes they have talked to some researchers who stated that they have used the price reduction to increase the number of samples they could run.

Maintains Outpeform and $41 tgt.

Notablecalls: Not actionable but good to know. When stocks start going down on reasons like this one, it's usually a bad sign for the bulls. Generally, I believe the better opportunitities are to be found on the short side over the next months.

No comments: