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S&P Downgrades Intuit

Intuit (INTU): Downgrades to 3 STARS (hold) from 5 STARS (buy)

Analyst: Scott Kessler

Despite the July quarter upside seen in small business and tax businesses, the sale of Intuit's Quicken loans mortgage unit will reduce revenues and earnings and contribute uncertainty to the Intuit story. S&P is lowering the earnings per share estimates for fiscal 2003 (July) by $0.15 to $1.01 and cutting fiscal 2003's by $0.19 to $1.29. S&P thinks selling the non-software mortgage unit makes sense, especially with the strength in this cyclical area. But, the revised fiscal 2003 price-earnings ratio of 36 and P/E-growth of 1.5 compares less favorably with the S&P 500's Software Industry's P/E of 28 and PEG of 1.6.

International Rectifier (IRF): Downgrades to 3 STARS (hold) from 5 STARS (buy)

Analyst: Thomas Smith

News from Intel and Advanced Micro of weakness in PCs, and in cell phones from Nokia, sets up the possibility of softer electronics sales than expected in 2002. Although International Rectifier sells its power MOSFET chips into diverse markets, including aircraft and washing machines, S&P is trimming estimates to reflect slower sales growth. S&P sees EPS of $0.74 in fiscal 2002 (Sept.), down from $0.77, and $1.40 in fiscal 2003, from $1.60. International Rectifier's valuation is reasonable at 16 times the $1.85 S&P sees in calendar 2003.

Vitesse Semiconductor (VTSS): Upgrades to 3 STARS (hold) from 2 STARS (avoid)

Analyst: Thomas Smith

Although the markets for chips used in high-speed communications equipment remain quite weak, Vitesse's share price has fallen below the tangible book value of 3.04 and, in S&P's view, largely reflects the end-market slowdown. Accordingly, S&P is taking a less bearish position on the shares. S&P stills estimate pro forma losses per share of $0.42 in fiscal 2002 (Sept.) and $0.20 in fiscal 2003.

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