Apple: Not So Golden

Apple Computer (AAPL ): Reiterate 2 STARS (avoid)

Analyst: Megan Graham-Hackett

Co. posts Q1 oper. loss of $0.73 vs. Street mean loss of $0.65, our $0.66 loss est. Revs. of $1B vs. $2.3B in line with co.'s preannouncement. gross margins were -2.1% vs. 25.9%, worse than our est., due to efforts to cut channel inventories which are now near normal levels. All geographies had large sales drop vs. Q4 except Europe. Units down 52%: iMac down 56%, high-end G4 down 51%. Co. sees profit in Q2, FY 01 (Sep.) revs. of $6B. Widening FY 01 loss est. to $0.34. With product transition ahead, economic uncertainty, avoid.

International Business Machines (IBM ): Reiterate 4 STARS (accumulate) Analyst: Megan Graham-Hackett

Solid Q4 EPS of $1.48 vs. $1.12 beat $1.46 Street mean, our $1.40 estimate. Q4 revenue up 6% to $25.6 bil., above our 3% estimate. Hardware revenue up surprising 10%, $1.5 bil. above our projection, aided by server and storage strength. PC revenue up 15% in constant currency. Services up 5%, e-business up 70%. New Q4 signings were $13 bil., backlog $85 bil. Software down 1% but saw strong middleware (up 190%), database (70%) sales. Co. comfortable with '01 Street est. At 21X our '01 $4.95 est., with momentum building, attractive.

Diebold, Inc. (DBD ): Downgrade to 3 STARS (hold) from 4 STARS (accumulate)

Analyst: Jim Corridore

DBD expects to report EPS of about $0.49 vs. $0.50 when it reports earnings on 1/23. Street consensus is at $0.55, we are at $0.54. Co. attributes miss to the slowdown in the U.S. economy, which impacted fourth quarter technology spending. DBD pursuing cost cutting and measures to improve sales. However, feel slowdown will impact DBD in first half of '01. Reducing '01 EPS est. to $2.00 from $2.20. Trading at 17X our new '01 est., see stock as market performer. Uncertainty of when economy picks up adds to risk.

KLA-Tencor Corp (KLAC ): Upgrade to 4 STARS (accumulate) from 3 STARS (hold)

Analyst: Thomas Smith

Posts Q2 FY 01 (Jun.) EPS $0.57 vs. $0.26, above $0.55 consensus. Revenue rises 73%, 7% Q/Q. Gross margin steady at record 57.3%. Book-to-bill ratio above one. Orders for capacity expansion reasons are slowing. But demand strong for must-have next generation wafer inspection tools to handle 300mm wafers, linewidths at 0.13 micron, copper interconnect materials. At 17X our $2.40 calendar '01 estimate, with 25% L-T growth rate, recommend accumulating KLAC ahead of expected industry upturn in 2nd half '01.

Advanced Micro Devices (AMD ): Reiterate 3 STARS (hold)

Analyst: Megan Graham Hackett

Q4 EPS $0.53 vs. $0.21. Below Street mean $0.55 and our $0.56 est. as revenue rose 22% to $1.18 bil, bit below our $1.2 bil. est. and co. preannouncement. PC chips, flash chips up 33%. Shipped some 7 mln. PC chips, in line with lowered guidance, but average price hurt by mix. Co. sees Q1 rev. flat with Q4 on better pricing but 6-6.5 mln. units shipped. Says Athlon demand strong, sees '01 PC mid-teens unit growth. Flash to remain strong. Cutting our '01 est. $0.35 to $2.00 on lower selling prices we expect. At 9X '01 est., hold AMD.

Check Point Software Technologies (CHKP ): Reiterate 4 STARS (accumulate)

Analyst: Jonathan Rudy

Posts Q4 EPS of $0.46 vs. $0.17, well above $0.38 consensus. Revenues more than doubled vs. our 90% estimate. Demand strong in all segments and geographies, as security has become top spending priority among IT departments. Both operating and net margins improved to exceptional near-60% level. Maintaining our '01 revenue growth estimate at 55%. However, upping '01 EPS estimate to $1.91, from $1.72. With P/E to growth rate around 1.5x and leading position in booming market, CHKP attractive.

Becton Dickinson (BDX ): Reiterate 3 STARS (hold)

Analyst: Robert Gold

Posts FY 01 (Sep.) Q1 results inline with 11/00 guidance. EPS at $0.23 vs $0.29 on 1.9% rev. decline. Revs. up 3% excl. currency, and co. remains committed to 7%-8% forex neutral rev. gain in Q2. Gross margins surprised on the upside, though SG&A slightly higher than expected.. Principal revenue and gross margin opportunities lie in safety products, particularly injection syringes and needles. Raising FY 01 est. by $0.01 to $1.63.. Outlook has improved given easier second half comps, more realistic financial targets.

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