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J.P. Morgan Cuts Pinnacle Systems to 'Neutral'


J.P. Morgan downgraded Pinnacle Systems (PCLE) to neutral from overweight.

Analyst Paul Coster says he's removing the stock from the Focus List. He says the 9 cents pro forma fourth-quarter earnings per share was disappointing vs. his 11 cents estimate and the 10 cents consensus. He notes strong revenues were offset by a mix-driven margin decline of over 350 basis points on the consumer side of the business, and higher-than-expected operating costs.

Coster says guidance was very disappointing despite the positive outlook for overall business. He notes seasonal weakness will combine with a decision to delay the launch of a new version of Studio, causing a steep 17.9% sequential revenue decline. Coster cut the 55 cents fiscal 2004 earnings per share (June) estimate to 29 cents.


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