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Prudential Cuts Maxim Integrated Products to Neutral

Prudential cut its investment recommendation on Maxim Integrated Products (MXIM) to neutral from overweight.

Analyst Mark Lipacis said he no longer believes the company is positioned to outperform based on the following: 1) gross margins are expected to decline as Maxim's mix shifts to lower margin products; 2) the company's September quarter growth is driven largely by products with seasonal revenue patterns (notebooks, handsets, cameras), which seem likely to decline heading into the first half of fiscal year 2006 (ending June); 3) options expense of $28 million was 21% of pro-forma net income. He believes options expensing will increasingly draw investor scrutiny into fiscal year 2006. He also cut his $1.69 fiscal year 2006 earnings per share estimate to $1.66 and his $47 target to $40.

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