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Macromedia Opinion Lowered to Hold


Macromedia (MACR): Downgrade to 3 STARS (hold) from 5 STARS (buy)

Analyst: Scott Kessler

Q3 FY 01 (Mar) EPS $0.29 vs. $0.15, $0.02 above consensus, but below S&P estimate. Sales driven by recent introductions of new software versions. MACR also to acquire Allaire Corp., a top provider of Web application development software, for $360 million in stock and cash. Even though purchase makes some operational sense, question timing of buying money-losing company and moving into a new product area with slowing economy. With limited guidance, see FY 02 pro forma revenue growth slowing to mid-20% area, EPS $1.70 (with newly unconsolidated subsidiary).

Intel (INTC): Reiterate 4 STARS (accumulate)

Analyst: Megan Graham-Hackett

Posts $0.38 vs. $0.35, in line. Revenues flat with Q3 at $8.7B, in line with co.'s 12/7 preannouncement. Gross margin of 63% vs. 61% also within co. guidance as average prices on target. Co. sees Q1 '01 rev. down 15% from Q4, gross margin near 58%, due to excess PC inventories, economic uncertainty. Capital expenditure spending of $7.5B in '01 vs. $6.7B in '00. Lowering '01 est. to $1.30 from $1.73, due to lower gross margin, higher SG&A expense as co. uses downturn to accelerate P4 ramp. At 24X conservative '01 est., INTC attractive for long-term.

Novellus Systems (NVLS): Reiterate 3 STARS (hold)

Analyst: Thomas Smith

Posts pro forma Q4 EPS $0.76 vs. $0.26, above $0.71 consensus. Revenue up 122%, 18% Q/Q. Backlog at record, but strong bookings pace weakened in Dec. Expect slow revenue growth in 1H '01, better in 2H. Chipmakers still making "technology buys" for tools for copper interconnect, 300mm wafers, but "capacity buys" way down. Completed Gasonix acquisition 1/10. Switching to new SAB 101 accounting in '01, which trims revenue, EPS outlook. Overall, Q4 was impressive. Okay to hold NVLS pending industry recovery.


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