NEEDHAM CUTS SALARY.COM TO HOLD FROM BUY
Needham analyst Richard Davis says Salary.com (SLRY) posted a "trifecta" of issues for investors to digest: first quarter revenue and EPS miss; guiding down on hiring ramp; naming of third CFO since IPO. He notes valuation is based on projected growth of cash flow and confidence in those estimates.
Davis says with this news, both metrics worsened. He says he didn't foresee the shift from what he thought was a compelling low cost of distribution and highly focused model. He believes the company's decision to build an HR management system platform to compete with a half dozen large firms in the face of a slowing economy could pay off handsomely, or it could be a disaster.
He widens $0.14 fiscal year 2009 (March) loss estimate to $0.80 loss.
CARIS DOWNGRADES BROCADE COMMUNICATIONS TO AVERAGE FROM BUY
Caris analyst Shebly Seyrafi says the downgrade of Brocade Communications Systems (BRCD) is based on subdued guidance and limited upside to stock. Seyrafi notes the company had a good quarter, but guided for third quarter revenue decline, noting macro concerns.
Seyrafi says growth in switch segment, which still provides the majority of the company's total revenue, has been weak. He notes the company sees $0.13-$0.14 third quarter EPS, compared to his and Street's $0.14 estimate.
The analyst thinks BRCD's rather subdued outlook, even with its product cycle, is an incremental negative for Emulex (ELX) and QLogic (QLGC). He notes the shares recently made a strong move and now have more limited upside.
Seyrafi sees $0.61 fiscal year 2008 (October) EPS and $0.63 for fiscal year 2009.
SUSQUEHANNA NOTES EARNINGS MISS FOR YUCHENG TECHNOLOGIES
Susquehanna analyst James Friedman says Yucheng Technologies Ltd. (YTEC) reported significant upside to revenue ($16 million, vs. his $11.1 million estimate), but aggressive roll-out of China merchant credit card (POS) systems caused minor miss in EPS ($0.09 vs. his $0.10 estimate).
Friedman says while gross profits of $5.1 million beat his $3.7 million estimate, these more than exhausted by POS initiatives, causing 164% spike in SG&A year-over-year to $3.7 million; consequently, $1.05 million operating income missed his $1.8 million est. But he says depending on growth rate, he estimates POS can generate as much as $0.20 of recurring annual EPS over time.
He believes creation of credit in China is a worthy investment and reiterates positive rating. He maintains $0.84 2008 EPS estimate and 20 price target.