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Monday, January 26, 2009

Microsoft, Broadcom, Juniper, Cisco

Microsoft (MSFT)

CEO Ballmer paints a bleak picture of recovery at an executive meeting Friday:

Asked about his assumptions for the economy, Ballmer said, "We may find a bottom in a year," according to a Microsoft employee who attended the meeting.

"I'm thinking the bottom is deep, but less deep than the 1929 bottom, for example," Ballmer was quoted as saying by the employee, who spoke on condition of anonymity because the meeting was not open to media.

"The economy goes down and stays down, then you start to get slow growth again in a few years," Ballmer said.


Broadcom (BRCM)

2009 estimate 97 to 63 Barclays.  Thinks could wind up 50-60 cents.  Valuation not compelling.


Juniper (JNPR)

Goldman and Barclays taking numbers down due to deteriorating enterprise demands and early signs of push-outs and cancellations by service providers.

The Skew:  Plexus, a contract manufacturer with roughly 20% Juniper exposure, has been reducing workforce at a number of facilities.  Could be Juniper related.  Would not argue against shorting Juniper.


Cisco (CSCO)

Numbers coming down at Morgan Stanley.  MS takes Q3 from 8.7 billion to 8.4 billion and EPS from 29 to 27 cents.  He thinks the current quarter is okay.  Stress testing his model, he can’t get worse than $1.00 in EPS for 2010.

The Skew:  Let me have at your model a minute there, guy.  I bet I can get that number down more than a buck.  Investors are likely to trough the multiple at 10* until Cisco lowers their revenue growth forecast below 12-15%.  Right now, its pricing in some skepticism about that forecast.  EPS estimates are still very vulnerable and that’s not lost on investors (though it’s probably worse than they’re expecting).


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