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S&P Cuts EchoStar to Strong Sell


EchoStar Communications (DISH): Downgrades to 1 STAR (strong sell) from 3 STARS (hold)

Analyst: Tuna Amobi, CPA, CFA

Our action reflects our view of the surprisingly adverse, and swift jury verdict on the DVR patent suit vs. Tivo (TIVO). While the $73 million award is unlikely to hurt EchoStar's long-term finances, and a likely appeal could span years, we see possibly higher financial exposure on the court's unqualified finding of willfull patent infringement. Separately, we remain wary of the looming Congressional June 2006 transition date for one-dish solution, which EchoStar estimates could trigger up to $100 million of costs under a worst-case scenario. Our target price drops $5 to $25, on relative enterprise value per subscriber.

Research In Motion (RIMM): Reiterates 4 STARS (buy)

Analyst: Ken Leon, CPA

Today's Wall Street Journal article says a slowdown in BlackBerry activations may lead to weak sales and an inventory glut at the service providers. While sequential quarterly new subscriber growth has slowed down, we see the weak sales tied to past legal problems that had many of Research in Motion's customers worried. With the NTP Inc. lawsuit settled, we believe Research In Motion will show accelerated subscriber and sales growth for the rest of the year. Also, we think expansion into China and other emerging markets should lead to 30% sales growth in 2006. Priced near peers but growing faster, we would buy RIMM shares.

Infosys (INFY): Reiterates 3 STARS (hold)

Analyst: Dylan Cathers

Fourth-quarter fiscal year 2006 (March) earnings per ADS of 56 cents, vs. 47 cents are 1 cent ahead of our estimate. Infosys announces a 2-for-1 stock split, pending shareholder approval, a special dividend of 67 cents per ADS, and a final dividend of 19 cents. We think the company will continue to add clients and deepen its bench with continued aggressive hiring. Pricing appears to be stable, though wage pressures will likely continue. We are raising our fiscal year 2007 earnings per ADS estimate by 2 cents, to $2.57. Our 12-month target price remains $78, which applies a peer-based p-e of 32 to our calendar 2006 estimate of $2.43.

New York Times (NYT): Maintains 3 STARS (hold)

Analyst: James Peters, CFA

Excluding one-time items, New York Times posts first-quarter earnings per share of 28 cents, vs. 30 cents, in line with our estimate. Revenues grew 3.3%, as weakness in the New England region was offset by strong growth at About.com and gains in the New York Times and Regional Media Groups. We think New York Times is on track to achieve operating margin expansion in the second half of 2006, and we are encouraged by its increasingly digital business model, as online revenues now represent about 7.5% of total sales. Our 2006 EPS estimate of $1.66 stays, but on contracting peer multiples, we are lowering our relative value based 12-month target price to $28 from $32.

Xilinx (XLNX) : Reiterates 4 STARS (buy)

Analyst: Thomas Smith, CFA

We are raising our estimates for Xilinx's first quarter revenue to 5% quarter over quarter growth from 3%, and first quarter earnings per share (EPS) by a penny to 24 cents including 5 cents of stock option expense. Xilinx reiterated guidance for first quarter sales will rise 1 to 5% quarter over quarter on March 6. On that same day, rival Altera (ALTR) reiterated its guidance for 4 to 7% quarter over quarter sales growth. Smaller rival Lattice (LSCC) raised the low end of its guided revenue range March 7. Overall, we see sales of programmable chips outpacing the semiconductor industry. We are raising our fiscal year 2006 (ending March) EPS estimate by a penny to 76 cents and fiscal year 2007 by 2 cents to $1.05.

Amerus Group (AMH) : Reiterates 3 STARS (hold)

Analyst: Frank Braden

Ahead of Amerus Group's first quarter results release, which is expected on May 2, we see adjusted net operating EPS of $1.23 vs $1.09. We expect Amerus Group to continue to benefit as the leader in national market share for indexed life products. We see margin improvement as its sales of higher-margin indexed annuities make up a greater portion of overall sales, due to strong demand and expanded distribution. We expect a further reduction in the emphasis on lower-margin life products. Our 2006 adjusted EPS estimate remains $5.05, and our 12-month target price stays $63, 12.5 times that estimate, and in line with Amerus Group's historical average.


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