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S&P Upgrades Credence Systems to Accumulate

Credence Systems (CMOS): Upgrades to 4 STARS (accumulate) from 3 STARS (hold)

Analyst: Richard Tortoriello

The low-cost semiconductor test equipment maker expects April quarter sales to rise 10% from the January quarter on a pickup in the latter half of the quarter. The company's primary customer base of foundries and subcontractors was the first to cut back, but also should be the first to spend as business improves. Credence is the winner with its Quartet mixed-signal product, and is launching the successor, Octet, in mid 2002. S&P is narrowing the fiscal 2002 (Oct.) loss per share estimate to $0.95, from $1.25. S&P is raising the fiscal 2003 estimate to earnings per share of $0.44, from a loss of $0.10. The stock is attractive at 1.8 times the book value, at historical lows.

Sun Microsystems (SUNW): Maintains 5 STARS (buy)

Analyst: Megan Graham Hackett

Sun announced its presidenct and COO Ed Zander plans to retire on July 1. Chairman and CEO Scott McNealy will add the president title. After 15 years at Sun, Zander had planned the move for the past year and with product/customer engagement transitions done, he chose to leave at fiscal year end, although he will remain through the end of the calendar year in a consulting role. The transition is part of a planned succession strategy that the company has worked on for the past few years. With McNealy in charge, and given the depth of new management, averaging 10 years at Sun, the shift is manageable. Sun is undervalued at price-to-sales multiple of 1.6.

Newell Rubbermaid (NWL): Reiterates 5 STARS (buy)

Analyst: Howard Choe

Excluding charges, the company posted first quarter earnings per share of $0.24 vs. $0.18, $0.02 above S&P's and the Street's forecast. Sales slipped 1%, but this was expected because of the KMart impact. The writing instruments unit was the strongest with sales up 5% and profit up 15%. Rubbermaid home products also are strong. Gross margin expanded nicely, up 220 basis points. The company's cash flow and balance sheet continue their up trend. Free cash flow rose 266%, and inventories and long term debt are down 12% and 32%, respectively. Sales should grow progressively throughout the year with new products and regained shelf space. Newell is attractive at 1.2 price/sales, and at a big discount to intrinsic value.

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