Peregrine Systems (PRGN): Downgrades to 2 STARS (avoid) from 4 STARS (accumulate)
Analyst: Mark Basham
The CEO and CFO resigned as Peregrine's board launched an internal investigation into revenue recognition irregularities totaling as much as $100 million. Transactions within the indirect sales channel may have been booked in periods in fiscal 2001 and 2002 and then subsequently written off. The amount of actual cash that may have possibly been involved is not specified. S&P is rlacing EPS estimates under review. Although the board is taking swift action as the situation coming to light, the damage already is done.
Earthlink (ELNK): Reiterates 3 STARS (hold)
Analyst: Scott Kessler
S&P says hold these shares -- even with the announced departure of the company's president and board member this morning, for personal reasons. The president will continue to work with Earthlink on special projects. The departure of the No. 2 leader is clearly a blow to the company that recently reported a disappointing first quarter. However, with significant broadband opportunities, in particular to cable, and with the recent $3.73 per share in net cash and investments, S&P still views Earthlink as worth holding at current levels. The shares are a decent value at 25 times the 2003 EPS estimate of $0.28, which could increase on greater cable success.
Autodesk (ADSK): Downgrades to 3 STARS (hold) from 4 STARS (accumulate)
Analyst: Jonathan Rudy
Autodesk announced disappointing expected results for the April quarter. Revenues will be $227-229 million, below the consensus of $243 million. EPS will be $0.14-$0.16, versus estimates of $0.24. Autodesk experienced weakness in the Asia region and in it s Discreet unit.. S&P is concerned by the magnitude of the miss, since most of Autodesk's design businesses are somewhat counter-cyclical in nature. S&P is lowering the fiscal 2003 (Jan.) EPS estimate to $0.97, from $1.10. With low single-digit growth prospects, and at 14 times S&P's estimates, and with no debt, Autodesk is worth holding.