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S&P "Skeptical" on eBay-Skype

eBay (EBAY): Reiterates 3 STARS (hold)

Analyst: Scott Kessler

eBay shares were down 4% in early trading on Thursday, after the Wall Street Journal ran an unconfirmed report that the online auction company is in talks to buy privately held Internet-telephony company Skype for $2 billion to $3 billion. We are skeptical. We do not think Skype would be very strategic to eBay, notwithstanding its franchise and cache. We also think similar acquisitions made in recent months by Microsoft and Yahoo were considerably less expensive. We would view this deal as a negative, based on relevance and possible price, and the implication that eBay's business model could become less appealing.

Apple Computer (AAPL): Reiterates 3 STARS (hold) Opinion

Analyst: Megan Graham-Hackett

A Wall Street Journal article resurrected the idea that Apple might provide its own iPod phone following the launch of the iTunes-based cell phone yesterday with Motorola (MOT) and Cingular. We believe it is possible, but at least a year away; challenges we see include a new business model for Apple and the creation of carrier relationships. We view the iPod nano as an improvement over iPod mini, with a sleeker size, attractive color display and better battery life. We see the shares, above their peers at a price/sales ratio of 3.2 times, as worth holding given our view of Apple's product momentum and solid cash position.

Royal Caribbean (RCL): Reiterates 3 STARS (hold) Opinion

Analyst: Thomas Graves, CFA

We are taking a more cautious approach to projected fuel costs, and we are lowering our 2005 earnings per share estimate to $2.70 from $2.80, which still includes an expected one-time gain of 19 cents. Although we continue to see a favorable environment for higher cruise prices in 2006, we are reducing our 2006 earnings per share estimate to $3.02 from $3.15. Based on our 2006 earnings per share estimates, the stock is at about a 13% p-e discount to shares of industry leader Carnival Corp. (CCL). Given lowered earnings per share projections, we are reducing our 12-month target price for Royal Caribbean to $48 from $51.

Carnival (CCL): Reiterates 4 STARS (buy) Opinion

Analyst: Thomas Graves, CFA

We are taking a more cautious approach to projected fuel costs and lowering our fiscal year 2005 (ending November) earnings per share estimate to $2.65 from $2.72, and our fiscal year 2006 estimate to $3.05 from $3.18. This includes a relatively modest adverse impact related to Hurricane Katrina, including the charter of three Carnival ships for expected relief efforts. We continue to expect shares of the industry leader Carnival to receive a premium p-e valuation to the S&P 500 (it's now about 16%), based on 2005 earnings per share estimates. However, with lowered earnings per share projections, we are reducing our 12-month target price to $59 from $63.

Solectron (SLR): Reiterates 3 STARS (hold) Opinion

Analyst: Richard Stice

Solectron announced the resignation of its CFO, Kiran Patel, who plans to assume a similar role with Intuit (INTU). We are disappointed by the news, as we believe that Mr. Patel has been instrumental in the company's ongoing restructuring efforts. However, we advise holding existing positions, given what we see as a favorable industry position, an ongoing trend by original equipment manufacturers to outsource product manufacturing and Solectron's recent improvement in a number of its operating metrics, which include long-term debt-to-capital and free cash flow. Our 12-month target price remains $4.

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